SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

x Annual report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 2006

-OR-

¨ Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from              to             .

Commission File Number: 01-13580

SUFFOLK BANCORP

(Name of Issuer in Its Charter)

New York	11-2708279
(State or Other Jurisdiction of Incorporation of Organization)	(I.R.S. Employer Identification No.)
4 West Second Street, P.O. Box 9000, Riverhead, New York	11901
(Address of Principal Executive Offices)	(Zip Code)

Issuer’s Telephone Number, Including Area Code: (631) 727-5667

Securities registered under Section 12(b) of the Exchange Act: None

Securities registered under Section 12(g) of the Exchange Act: Common Stock, par value $2.50 per share

(Title of Class)

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    YES  ¨    NO  x

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act YES  ¨    NO  x

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    YES  x    NO  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein and will not be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  ¨    Accelerated filer  x    Non-accelerated filer  ¨

Indicate by check mark whether the Registrant is a shell company.    YES  ¨    NO  x

The aggregate market value of the common equity held by non-affiliates of the Registrant as of the last business day of the Registrant’s most recently completed second fiscal quarter was $364.9 million.

As of January 31, 2007, there were 10,239,392 shares outstanding of the Registrant’s common stock.

On The Cover

The Connetquot River and Great South Bay

The Connetquot River is one of four major rivers on Long Island. It wanders through portions of the Connetquot River State Park Preserve, which covers 3,473 acres of land and water, and it empties into Great South Bay. Deer, raccoon, skunk, bats, squirrel, rabbit, opossum, and red fox are common; as are waterfowl including canvasback, gadwall, black duck, ring-necked duck, and mergansers, mute swans, Canada geese, mallards, and rare nesting birds, including the osprey; and numerous rare plants. The preserve also has 50 miles of trails for hiking, horseback riding, and cross-country skiing, and is popular with fishermen. The Secatog Native Americans originally inhabited these lands. They gave the river its name, Connetquot, which means “Great River.” Europeans settled there in the 1600’s. In 1866, the land was purchased as a sportsmen’s club. In 1963, the club sold its property to New York State. The park opened to the public in 1973.

Preserves of great natural beauty in close proximity to commercial centers and attractive residential communities are part of the great appeal of Long Island to entrepreneurs and the highly skilled workers they employ. People work hard to live near amenities such as these, and in doing so, contribute to the vitality and affluence of the region and thus to Suffolk Bancorp’s bottom line. Suffolk’s banking subsidiary, Suffolk County National Bank, operates four offices in some of the communities that surround the Connetquot River State Park Preserve including, clockwise, from west to east, West Babylon, Deer Park, Hauppauge, and Bohemia.

Corporate Profile

Suffolk Bancorp does commercial banking through its wholly owned subsidiary, Suffolk County National Bank. Organized in 1890, “SCNB” is a full-service, nationally chartered commercial bank. Most of SCNB’s revenue comes from net interest income, and the remainder from charges for a variety of services. SCNB has built a good reputation for personal, attentive service, resulting in a loyal and growing clientele. SCNB operates 27 full-service offices throughout Suffolk County, New York.

The staff at SCNB works hard to develop and maintain ties to the communities it serves. SCNB’s business includes loans to small and medium-sized commercial enterprises, to professionals, and to individual consumers. Suffolk Bancorp’s main strategic focus is on small businessmen and professionals and those retail customers who need a range of financial services tailored to their individual needs, and who expect the kind of personal service that is possible only through the establishment of relationships that develop over time. In recent years commercial loans of all types have increased as a percentage of the loan portfolio and have made substantial contributions to SCNB’s profitability. SCNB’s primary market is Long Island, New York. Long Island is home to approximately 2.8 million people outside of the limits of New York City and is primarily suburban in nature. Nassau County and the western end of Suffolk County are a center for commerce and are highly developed, supporting a diversified economy. The economy on eastern Long Island is based on services that support tourism, a large number of second homes, and agriculture. Together, they generate family incomes greater than the national average, providing Suffolk Bancorp with a steady and growing demand for loans and other services, and a reliable, reasonably priced supply of deposits.

Financial Highlights

	(dollars in thousands, except ratios, share, and per-share information)
	December 31,	2006			2005
EARNINGS FOR THE YEAR	Net income	$	22,628		$	22,102
	Net interest income		65,710			64,361
	Net income-per-share		2.20			2.09
	Cash dividends-per-share		0.88			0.79
BALANCES AT YEAR END	Assets	$	1,392,649		$	1,409,866
	Net loans		883,896			895,209
	Investment securities		418,343			417,312
	Deposits		1,139,075			1,158,707
	Equity		108,566			102,001
	Shares outstanding		10,242,291			10,406,721
	Book value per com mon share	$	10.60		$	9.80
RATIOS	Return on average equity		22.16	%		22.18	%
	Return on average assets		1.61			1.59
	Average equity to average assets		7.25			7.19
	Net interest margin (taxable-equivalent)		5.16			5.09
	Efficiency ratio		52.34			50.28
	Net (recoveries) charge-offs to average net loans		0.36			(0.01	)

CORPORATE INFORMATION

Suffolk Bancorp Annual Meeting

Tuesday, April 10, 2007, 1:00 P.M.

Suffolk County National Bank

Administrative Center

Lower Level

Four West Second Street

Riverhead, New York

S.E.C. Form 10-K

The Annual Report to the Securities and Exchange Commission on Form

10-K and documents incorporated by reference can be obtained, without

charge, by writing to the Secretary, Suffolk Bancorp, 4 West Second Street,

Riverhead, New York 11901, or call (631) 727-5667, fax to (631) 727-3214,

or e-mail to

invest@suffolkbancorp.com

Trading

Suffolk Bancorp’s common stock is traded over-the-counter, and is listed on

the NASDAQ National Market System under the symbol “SUBK.”

Registrar and Transfer Agent

Any questions about the registration or transfer of shares, the payment,

reinvestment, or direct deposit of dividends can be answered by:

American Stock Transfer

& Trust Co.

59 Maiden Lane

New York, New York 10038

1-800-937-5449

www.amstock.com

Registered Independent Public Accountant

Grant Thornton LLP

Two Commerce Square

Suite 3100

2001 Market Street

Philadelphia, Pennsylvania 19103

General Counsel

Smith, Finkelstein, Lundberg,

Isler & Yakaboski, LLP

456 Griffing Avenue

Riverhead, New York 11901

FDIC Rules and Regulations, Part 350.4(d)

This statement has not been reviewed, or confirmed for accuracy or relevance,

by the Federal Deposit Insurance Corporation.

2

TABLE OF CONTENTS

Corporate Profile	1
Financial Highlights	1
Corporate Information	2
To Our Shareholders	4
Price Range of Common Stock and Dividends	6
Summary of Selected Financial Data	6
Management’s Discussion and Analysis of Financial Condition and Results of Operations	7
Summary of Recent Developments and Current Trends	7
Suffolk’s Business	8
General Economic Conditions	8
Results of Operations	8
Net Income	8
Net Interest Income	8
Average Assets, Liabilities, and Stockholders’ Equity, Rate Spread, and Effective Interest Rate Differential	9
Analysis of Changes in Net Interest Income	10
Interest Income	10
Investment Securities	10
Loan Portfolio	11
Non-Performing Loans	12
Summary of Loan Losses and Allowance for Loan Losses	12
Interest Expense	13
Deposits	13
Short-Term Borrowings	14
Other Income	14
Other Expense	14
Interest Rate Sensitivity	14
Market Risk	15
Interest Rate Risk	15
Asset/Liability Management & Liquidity	16
Contractual and Off-Balance-Sheet Obligations	17
Capital Resources	17
Risk-Based Capital and Leverage Guidelines	18
Discussion of New Accounting Pronouncements	18
Critical Accounting Policies, Judgments, and Estimates	20
Business Risks and Uncertainties	20
Management’s Report on Internal Control over Financial Reporting	20
Consolidated Statements of Condition	21
Consolidated Statements of Income	22
Consolidated Statements of Changes in Stockholders’ Equity	23
Consolidated Statements of Cash Flows	24
Notes to Consolidated Financial Statements	25
Report of Independent Registered Public Accounting Firm - Internal Control	39
Report of Independent Registered Public Accounting Firm - Financial Statements	40
Report of Management	40
Annual Report of Form 10-K	41
Certifications of Periodic Report	49
Directors and Officers - Suffolk Bancorp	50
Directors and Officers - Suffolk County National Bank	51
Directory of Offices and Departments	inside back cover

3

Dear Shareholder:

Suffolk Bancorp and its wholly owned subsidiary, Suffolk County National Bank, surmounted a variety of challenges facing commercial banks during 2006. The results were these:

Net income was $22,628,000, up 2.4 percent from $22,102,000 last year. Earnings-per-share were $2.20, up 5.3 percent compared to $2.09 during 2005. Net interest income increased by 2.1 percent, to $65,710,000 from $64,361,000. Income other than from interest increased by 5.2 percent, to $10,672,000. Expense other than for interest increased by 6.7 percent, to $39,975,000 from $37,453,000. Most important, we achieved return on average equity of 22.16 percent, down slightly from 22.18 percent last year. This is the sixth consecutive year that this measure has exceeded 20 percent. That compares to 9.73 percent for banks in the New York metropolitan area at September 30, 2006, the date of the most recently available information (source: SNL Securities). Return on average assets increased to 1.61 percent from 1.59 percent, again compared to 0.89 percent for the New York metro area. Our net interest margin increased to 5.16 percent from 5.09 percent, compared to 3.87 percent in greater New York. The quality of our assets is high, with net charge-offs of 0.36 percent for the year even including the one significant charge-off in our recent past, now behind us as discussed in previous press releases. The Allowance for Loan Losses stands at more than nine times non-performing loans. Our efficiency ratio increased from year to year to 52.34 percent compared to 50.28 percent, considerably better than in the banking industry as a whole.

Breaking down the components, we find that interest income increased by 13.9 percent, to $86.2 million from $75.7 million, resulting mainly from a healthy 17.2 percent increase in income from loans. Contributing as well was an increased income from municipal investments, which comprise a larger part of our assets than in the recent past. In the current environment, these investments provide attractive yields on a tax-equivalent basis.

Interest expense increased by 81.2 percent, to $20.5 million from $11.3 million, again reflecting the inversion of the yield curve and the increased rate sensitivity of short-term deposits.

Other income increased by 5.2 percent in part due to increases in other service charges, commissions from insurance and investment sales. Other expense increased creased by $2.5 million as a result of our ongoing desire to attract talent and our expenditures on branch renovations and improved locations, and continued investment in technology.

4

Nonetheless, it has been a challenging year for reasons we have discussed previously. The yield curve has remained stubbornly, persistently flat or inverted, causing the rates of interest on the assets in which banks typically invest and the monies which fund them to converge. We have been able to maintain our net interest margin by choosing our assets selectively with an eye to maintaining taxable-equivalent yield, and adhering strictly to the “marginal-cost-of-funds approach” to managing our funding. However, excess capacity in the industry and the resulting, unsustainable pricing for both assets and liabilities by our competitors, has made it difficult to grow for now. We are more concerned with the profitability of our enterprise in the long term, and we do not want to encumber it with low-yielding assets or over-priced liabilities that will compromise our net interest margin when the yield curve finally rights itself, as it will, eventually and inevitably. Then we will be able to grow once again with a balance sheet of the quality our shareholders have come to expect. In the meantime, our objective is to maintain the standing of our business, including most importantly the relationships with customers that underlie any successful commercial banking company.

Boards of Directors and management of commercial banking companies deal completely in other people’s money, whether that of customers or that of the shareholders who own the business. At Suffolk Bancorp, we believe that every decision we make, whether strategic or tactical, has to be rooted firmly in our fiduciary duty to those constituents. We have always endeavored to make our stock one that investors consider a core holding in their portfolio, positioned to provide good returns over the longest term possible. We believe that we have the discipline to remain firmly focused on that objective, which is the foundation of ongoing shareholder value.

Sincerely,

Thomas S. Kohlmann

Chairman, President & Chief Executive Officer

5

P RICE RANGE OF COMMON STOCK AND DIVIDENDS

Suffolk’s common stock is traded in the over-the-counter market, and is quoted on the NASDAQ National Market System under the symbol “SUBK.” Following are quarterly high and low prices of Suffolk’s common stock as reported by NASDAQ.

2006	High		Low		Dividends		2005	High		Low		Dividends
First Quarter	$	37.00	$	31.77	$	0.22	First Quarter	$	35.62	$	30.95	$	0.19
Second Quarter		35.00		28.17		0.22	Second Quarter		34.49		25.68		0.20
Third Quarter		35.00		29.30		0.22	Third Quarter		34.76		28.94		0.20
Fourth Quarter		38.95		31.01		0.22	Fourth Quarter		37.00		27.01		0.20

At January 31, 2007, there were approximately 1,585 equity holders of record and approximately 1,700 beneficial shareholders of the Company’s common stock.

SUMMARY OF SELECTED FINANCIAL DATA

FIVE-YEAR SUMMARY: (dollars in thousands except per-share amounts)
For the years	2006			2005			2004			2003			2002
Interest income	$	86,209		$	75,673		$	67,984		$	70,995		$	78,428
Interest expense		20,499			11,312			7,379			9,801			16,088
Net interest income		65,710			64,361			60,605			61,194			62,340
Provision for loan losses		966			1,575			1,973			932			1,380
Net interest income after provision		64,744			62,786			58,632			60,262			60,960
Other income		10,672			10,145			12,294			11,310			10,073
Other expense		39,975			37,453			36,621			36,190			35,744
Income before income taxes		35,441			35,478			34,305			35,382			35,289
Provision for income taxes		12,813			13,376			13,430			14,046			14,020
Net Income	$	22,628		$	22,102		$	20,875		$	21,336		$	21,269
BALANCE AT DECEMBER 31:
Federal funds sold	$	—		$	—		$	2,500		$	4,300		$	17,500
Investment securities – available for sale		403,246			400,038			427,678			376,189			359,903
Investment securities – held to maturity		15,097			17,274			14,461			14,641			16,983
Total investment securities		418,343			417,312			442,139			390,830			376,886
Net loans		883,896			895,209			817,220			830,510			779,862
Total assets		1,392,649			1,409,866			1,348,218			1,328,757			1,272,717
Total deposits		1,139,075			1,158,707			1,197,592			1,187,496			1,142,582
Other borrowings		120,135			127,975			25,300			20,000			—
Stockholders’ equity	$	108,566		$	102,001		$	106,212		$	100,170		$	108,793
SELECTED FINANCIAL RATIOS:
Performance:
Return on average equity		22.16	%		22.18	%		20.85	%		21.93	%		21.12
Return on average assets		1.61			1.59			1.53			1.64			1.72
Net interest margin (taxable-equivalent)		5.16			5.09			4.90			5.13			5.45
Efficiency ratio		52.34			50.28			50.24			49.91			49.36
Average equity to average assets		7.25			7.19			7.35			7.50			8.13
Dividend pay-out ratio		39.19			37.56			39.69			38.74			34.70
Asset quality:
Non-performing assets to total loans, net of discount		0.09			0.49			0.65			0.22			0.22
Non-performing assets to total assets		0.06			0.32			0.40			0.14			0.14
Allowance to non-performing assets		916.38			220.41			153.06			470.09			494.60
Allowance to loans, net of discount		0.85			1.09			0.99			1.02			1.10
Net charge-offs (recoveries) to average net loans		0.36			(0.01	)		0.28			0.13			0.19
PER-SHARE DATA:
Net income (basic)		2.20			2.09			1.92			1.92			1.82
Cash dividends		0.88			0.79			0.76			0.76			0.68
Book value at year-end		10.60			9.80			9.80			9.15			9.47
Highest market value		38.95			37.00			36.30			37.58			39.60
Lowest market value		28.17			25.68			29.69			29.40			26.50
Average shares outstanding		10,279,870			10,570,896			10,882,327			11,055,897			11,657,984
Number of full-time-equivalent employees		357			369			374			377			391
Number of branch offices		27			27			26			26			27
Number of automatic teller machines		26			25			25			24			23

6

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

The discussion that follows analyzes Suffolk Bancorp’s (“Suffolk”) operations for each of the past three years and its financial condition as of December 31, 2006 and 2005, respectively. Selected tabular data are presented for each of the past five years.

Summary of Recent Developments and Current Trends

Suffolk Bancorp is a one-bank holding company engaged in the commercial banking business through The Suffolk County National Bank, a full-service commercial bank headquartered in Riverhead, New York. “SCNB” is Suffolk Bancorp’s wholly owned subsidiary. Organized in 1890, Suffolk County National Bank is headquartered on Long Island, with 27 offices in Suffolk County, New York.

Recent Developments

Interest rates continued to rise during the first half of the year, in part as a result of increases to the federal funds and discount targets set by the Federal Reserve Board. At times, both short- and long-term rates rose in parallel, but during the course of the year, short-term rates rose more than long-term rates. Throughout the year, the short end of the yield curve remained inverted, meaning that rates for certain shorter terms exceeded those for certain other intermediate terms. Suffolk’s net interest margin, on a taxable-equivalent basis, increased to 5.16 percent from 5.09 percent, year to year.

Return on average equity decreased slightly, to 22.16 percent for the year from 22.18 percent during 2005, and basic earnings-per-share increased to $2.20, from $2.09 during the prior year.

Key to maintaining performance was close management of the balance sheet. Steps included:

• Continuing to redirect the flow of investment from the consumer portfolio, comprised primarily of indirect automobile paper, to residential mortgages, construction loans, and commercial loans.

• Repositioning the investment portfolio from maturing collateralized mortgage obligations, originally purchased to provide downside protection from falling rates, to purchase municipal securities currently providing liquidity as well as higher returns, and some protection against falling interest rates.

• Pursuing an ongoing program of capital management, which applies leverage to shareholders’ investment by means of the selective repurchase of shares, while maintaining “well-capitalized” status with regulatory agencies. During the year, Suffolk repurchased approximately 1.7 percent of the shares outstanding at the beginning of 2006.

• Maintaining emphasis on both commercial and personal demand deposits, while responding to increased call for time certificates of $100,000 or more. Demand deposits increased 0.6 percent year to year, while other interest-bearing deposits declined by 3.0 percent. Time certificates of $100,000 or more increased 417.2% year to year.

• Managing net loan charge-offs which were comparable to industry averages, at 36 basis points of average net loans.

Current Trends

• Continued changes in the balance of funding from deposits to borrowings from capital markets were undertaken to moderate the rate of increase in interest paid for deposits. Again, overcapacity in the industry has encouraged certain competitors to price deposits above comparable instruments in the money markets.

• Residential mortgages and construction loans made up for that decline, with increasing rates of return. However, overcapacity in the industry in combination with an inverted yield curve has encouraged certain competitors to price loans without an appropriate premium for the risk inherent in longer terms.

• Consumer loans continued to decline in the face of the incentive programs of the major manufacturers, as well as from a decline in new car sales.

7

Suffolk’s Business

Nearly all of Suffolk’s business is to provide banking services to its commercial and retail customers in Suffolk County, on Long Island, New York. Suffolk is a one-bank holding company. Its banking subsidiary, Suffolk County National Bank (the “Bank”), operates 27 full-service offices in Suffolk County, New York. It offers a full line of domestic, retail, and commercial banking services, and trust services. The Bank’s primary lending area includes all of Suffolk County, New York, and a limited number of loans or loan-participations in the adjacent markets of Nassau County and New York City. The Bank makes loans that are secured by commercial real estate and float with the prime rate, which are retained in the Bank’s portfolio: commercial and industrial loans to small manufacturers, wholesalers, builders, farmers, and retailers, including dealer financing. The Bank serves as an indirect lender to the customers of a number of automobile dealers. The Bank also makes loans secured by residential mortgages, and both fixed and floating rate second mortgage loans with a variety of plans for repayment. Real estate construction loans are also offered.

Other investments are made in short-term United States Treasury debt, high-quality obligations of municipalities in New York State, issues of agencies of the United States government, collateralized mortgage obligations, mortgage-backed securities, and stock in the Federal Reserve Bank and the Federal Home Loan Bank of New York, each required as a condition of membership.

The Bank finances most of its activities with deposits, including demand, saving, N.O.W., and money market accounts, as well as term certificates. It also relies on other short-term sources of funds, including inter-bank overnight loans, and sale-repurchase agreements.

General Economic Conditions

Long Island has a population of approximately 2.8 million people, which accounts for 20 percent of the population of New York State. Health, business services, and education and training clusters grew the fastest of all industry clusters over the past 5 years. Long Island’s overall private sector employment grew by about 14 percent or 150,000 jobs between 1996 and 2006 compared to the national figure of 13%. More recently, employment growth continued at a slower pace with the overall job growth from 2005 to 2006 at less than 1 percent (source: Long Island Index 2007).

The economy on Long Island continued to grow during 2006; however, there was some loss of momentum during the second half of the year. Interest rates continued to rise during the first half of the year from their low point during 2004. Demand for finance, information, transportation, and tourism continued, and employment remained stable in the region. Long Island has a highly educated and skilled work force and a diverse industrial base. It is adjacent to New York City, one of the world’s largest centers of distribution and a magnet for finance and culture. The island’s economic cycles vary from those of the national economy. In general, Long Island’s economy seems to have been more stable than the national economy, owing in part to its comparative diversity.

Results of Operations

Net income

Net income was $22,628,000 compared to $22,102,000 last year and $20,875,000 in 2004. These figures represent an increase of 2.4 percent and 5.9 percent, respectively. Basic earnings-per-share were $2.20 during 2006, compared to $2.09 last year and $1.92 in 2004.

Net Interest Income

Net interest income during 2006 was $65,710,000, up 2.1 percent from $64,361,000 in 2005, which was up 6.2 percent from $60,605,000 in 2004. Net interest income is the most important part of the net income of Suffolk. The effective interest rate differential, on a taxable-equivalent basis, was 5.16 percent in 2006, 5.09 percent during 2005, and 4.90 percent in 2004. Average rates on average interest-earning assets increased to 6.72 percent in 2006, up from 5.97 percent in 2005, and 5.50 percent in 2004. Average rates on average interest-bearing liabilities increased to 2.39 percent in 2006, up from 1.34 percent in 2005, and 0.89 percent in 2004. The interest rate differential increased in 2006, up from 2005 and 2004. Demand deposits remained a significant source of funds as a percentage of total liabilities.

8

Average Assets, Liabilities, Stockholders’ Equity, Rate Spread, and Effective Interest Rate

Differential (on a taxable-equivalent basis)

The following table illustrates the average composition of Suffolk’s statements of condition. It presents an analysis of net interest income on a taxable-equivalent basis, listing each major category of interest-earning assets and interest-bearing liabilities, as well as other assets and liabilities: (dollars in thousands)

Year ended December 31,	2006							2005							2004
	Average Balance		Interest			Average Rate		Average Balance		Interest			Average Rate		Average Balance		Interest			Average Rate
Interest-earning assets
U.S. Treasury securities	$	9,580	$	405		4.23	%	$	9,416	$	393		4.17	%	$	9,790	$	423		4.32	%
Collateralized mortgage obligations		174,680		7,887		4.52			230,248		9,457		4.11			251,934		10,203		4.05
Mortgage-backed securities		1,369		95		6.94			2,733		140		5.12			6,875		162		2.36
Obligations of states & political subdivisions		101,923		6,072		5.96			57,587		3,269		5.68			26,022		1,442		5.54
U.S. government agency obligations		122,573		4,879		3.98			125,443		4,896		3.90			107,601		4,342		4.04
Corporate bonds & other securities		5,755		343		5.96			3,055		147		4.81			2,486		80		3.22
Federal funds sold & securities purchased under agreements to resell		5,426		281		5.18			2,904		91		3.13			23,919		310		1.30
Loans, including non-accrual loans
Commercial, financial & agricultural loans		185,548		15,192		8.19			169,338		11,392		6.73			168,188		8,832		5.25
Commercial real estate mortgages		305,121		22,883		7.50			288,065		19,965		6.93			240,146		16,381		6.82
Real estate construction loans		71,290		7,283		10.22			56,191		5,134		9.14			37,630		2,693		7.16
Residential mortgages (1st and 2nd liens)		134,687		8,829		6.56			117,575		7,476		6.36			110,594		7,011		6.34
Home equity loans		78,464		6,373		8.12			78,465		5,082		6.48			66,510		3,439		5.17
Consumer loans		115,807		7,766		6.71			142,426		9,268		6.51			191,980		13,134		6.84
Other loans		1,671		—		—			2,098		—		—			1,717		—		—
Total interest-earning assets	$	1,313,894	$	88,288		6.72	%	$	1,285,544	$	76,710		5.97	%	$	1,245,392	$	68,452		5.50	%
Cash & due from banks	$	47,044						$	47,803						$	52,403
Other non-interest-earning assets		47,713							52,732							64,901
Total assets	$	1,408,651						$	1,386,079						$	1,362,696
Interest-bearing liabilities
Saving, N.O.W. & money market deposits	$	475,634	$	4,791		1.01	%	$	561,137	$	3,689		0.66	%	$	600,668	$	2,755		0.46	%
Time deposits		245,996		8,748		3.56			218,825		5,431		2.48			220,248		4,577		2.08
Total saving & time deposits		721,630		13,539		1.88			779,962		9,120		1.17			820,916		7,332		0.89
Federal funds purchased & securities sold under agreements to repurchase		58,678		2,955		5.04			35,208		1,252		3.56			27		0		1.45
Other borrowings		78,833		4,005		5.08			27,961		940		3.36			3,815		47		1.23
Total interest-bearing liabilities	$	859,141	$	20,499		2.39	%	$	843,131	$	11,312		1.34	%	$	824,758	$	7,379		0.89	%
Rate spread						4.33	%						4.63	%						4.60	%
Non-interest-bearing deposits	$	431,067						$	423,214						$	401,718
Other non-interest-bearing liabilities		16,342							20,066							36,114
Total liabilities	$	1,306,550						$	1,286,411						$	1,262,590
Stockholders’ equity		102,101							99,668							100,106
Total liabilities & stockholders’ equity	$	1,408,651						$	1,386,079						$	1,362,696
Net interest income (taxable-equivalent basis) & effective interest rate differential			$	67,789		5.16	%			$	65,398		5.09	%			$	61,073		4.90	%
Less: taxable-equivalent basis adjustment				(2,079	)						(1,037	)						(468	)
Net interest income			$	65,710						$	64,361						$	60,605

Interest income on a taxable-equivalent basis includes the additional amount of interest income that would have been earned if Suffolk’s investment in nontaxable U.S. Treasury securities and state and municipal obligations had been subject to New York State and federal income taxes yielding the same after-tax income. The rate used for this adjustment was approximately 34 percent for federal income taxes and 9 percent for New York State income taxes for all periods. For each of the years 2006, 2005, and 2004, $1.00 of nontaxable income from obligations of states and political subdivisions equates to fully taxable income of $1.52 and for $1.00 of nontaxable income from taxable obligations of state and political subdivisions equates to fully taxable income of $1.50. In addition, in 2006, 2005, and 2004, $1.00 of nontaxable income on U.S. Treasury securities equates to $1.02 of fully taxable income. The amortization of loan fees is included in interest income.

9

Analysis of Changes in Net Interest Income

The table below presents a summary of changes in interest income, interest expense, and the resulting net interest income on a taxable-equivalent basis for the periods presented, each as compared with the preceding period. Because of numerous, simultaneous changes in volume and rate during the period, it is not possible to allocate precisely the changes between volumes and rates. In this table changes not due solely to volume or to rate have been allocated to these categories based on percentage changes in average volume and average rate as they compare to each other: (in thousands)

	In 2006 over 2005 Changes Due to								In 2005 over 2004 Changes Due to
	Volume			Rate		Net Change			Volume			Rate			Net Change
Interest-earning assets
U.S. Treasury securities	$	7		$	5	$	12		$	(16	)	$	(14	)	$	(30	)
Collateralized mortgage obligations		(2,443	)		873		(1,570	)		(889	)		143			(746	)
Mortgage-backed securities		(84	)		40		(44	)		(137	)		115			(22	)
Obligations of states & political subdivisions		2,601			202		2,803			1,776			51			1,827
U.S. government agency obligations		(113	)		96		(17	)		700			(146	)		554
Corporate bonds & other securities		154			42		196			21			46			67
Federal funds sold & securities purchased under agreements to resell		108			81		189			(421	)		202			(219	)
Loans, including non-accrual loans		2,710			7,299		10,009			2,427			4,400			6,827
Total interest-earning assets	$	2,940		$	8,638	$	11,578		$	3,461		$	4,797		$	8,258
Interest-bearing liabilities
Saving, N.O.W., & money market deposits	$	(629	)	$	1,731	$	1,102		$	(192	)	$	1,126		$	934
Time deposits		739			2,578		3,317			(29	)		883			854
Federal funds purchased & securities		2,908			22		2,930			24			1			25
Other borrowings		667			1,171		1,838			1,895			225			2,120
Total interest-bearing liabilities	$	3,685		$	5,502	$	9,187		$	1,698		$	2,235		$	3,933
Net change in net interest income (taxable-equivalent basis)	$	(745	)	$	3,136	$	2,391		$	1,763		$	2,562		$	4,325

Interest Income

Interest income increased to $86,209,000 in 2006, up 13.9 percent from $75,673,000 in 2005, and 11.3 percent from $67,984,000 in 2004.

I nvestment Securities

Average investment in U.S. government agency securities decreased to $122,573,000 from $125,443,000 in 2005, which was up from $107,601,000 in 2004. Average balances of CMO’s decreased to $174,680,000 in 2006 from $230,248,000 in 2005, and $251,934,000 in 2004. Average investments in municipal securities increased to $101,923,000 in 2006, up from $57,587,000 in 2005 and $26,022,000 in 2004. U.S. Treasury, U.S. government agency, collateralized mortgage obligations, and municipal securities provide collateral for various liabilities to municipal depositors. Securities are Suffolk’s primary source of liquidity. With regard to securities characterized as available for sale, in general, Suffolk has the intent and ability to hold them until maturity. The following table summarizes Suffolk’s investment securities available for sale and held to maturity as of the dates indicated: (in thousands)

December 31,	2006		2005		2004
Investment securities available for sale, at fair value:
U.S. Treasury securities	$	9,423	$	9,337	$	9,516
U.S. government agency debt securities		122,883		123,421		127,049
Collateralized mortgage obligations agency issues		156,239		194,404		257,199
Collateralized mortgage obligations private issues		—		—		405
Mortgage-backed securities		1,072		1,788		4,231
Obligations of states & political subdivisions		113,629		71,088		29,278
Total investment securities available for sale		403,246		400,038		427,678
Investment securities held to maturity:
Obligations of states & political subdivisions		9,913		11,378		11,900
Corporate bonds & other securities		5,184		5,896		2,561
Total investment securities held to maturity		15,097		17,274		14,461
Total investment securities	$	418,343	$	417,312	$	442,139
Fair value of investment securities held to maturity	$	15,647	$	17,885	$	15,151
Unrealized gains		588		664		732
Unrealized losses		38		53		42

10

The amortized cost, maturities, and approximate weighted average yields, at December 31, 2006 are as follows: (in thousands)

	Available for Sale												Held to Maturity
	U.S. Treasury Securities				U.S. Govt. Agency Debt				Obligations of States & Political Subdivisions				Obligations of States & Political Subdivisions				Corporate Bonds & Other Securities
Maturity (in years)	Fair Value		Yield		Fair Value		Yield		Fair Value		Yield		Amortized Cost		Yield		Amortized Cost		Yield	Total		Yield
Within 1	$	—	—	%	$	19,893	2.99		$	—	—		$	2,919	4.08	%	$	—	—	$	22,812	3.13	%
After 1 but within 5		9,423	4.18			102,990	4.01	%		2,102	4.22			1,405	4.09	%		—	—	$	115,920	4.03	%
After 5 but within 10		—	—			—	—			47,249	3.61			2,953	4.56			—	—	$	50,202	3.67	%
After 10		—	—			—	—			64,278	3.84	%		2,636	6.18	%		—	—	$	66,914	3.93	%
Other securities		—	—			—	—			—	—			—	—			5,184	—	$	5,184	—
Subtotal	$	9,423	4.18	%	$	122,883	3.84	%	$	113,629	3.75	%	$	9,913	4.78	%	$	5,184	—	$	261,032	3.78	%
Collateralized mortgage obligations																				$	156,239	5.33	%
Mortgage-backed securities																				$	1,072	7.39	%
Total	$	9,423	4.18	%	$	122,883	3.84	%	$	113,629	3.75	%	$	9,913	4.78	%	$	5,184	—	$	418,343	4.37	%

As a member of the Federal Reserve System, the Bank owns Federal Reserve Bank stock with a book value of $638,000. Being an equity investment, the stock has no maturity. There is no public market for this investment. The last dividend was 6.0 percent.

As a member of the Federal Home Loan Bank of New York, the Bank owns Federal Home Loan Bank of New York stock with a book value of $4,446,000. Being an equity investment, the stock has no maturity. There is no public market for this investment. The last declared dividend was 7.0 percent.

Loan Portfolio

Loans, net of unearned discounts but before the allowance for loan losses, totaled $891,447,000. Loans secured by commercial real estate amounted to $292,458,000 and comprise 32.8 percent of the portfolio, the largest single component, down from $308,436,000 in 2005, and up from $262,262,000 in 2004. Commercial and industrial loans followed at $182,840,000, up 1.8 percent from $179,523,000 at the end of 2005. These loans are made to small local businesses throughout Suffolk County. Commercial loan balances are seasonal, particularly in the Hamptons where retail inventories rise in the spring and decline by autumn. Consumer loans are a declining part of the portfolio. Net of unearned discounts, they totaled $103,102,000 at the end of 2006, down 22.4 percent from $132,930,000 at year-end 2005. Consumer loans include primarily indirect, dealer-generated automobile loans. Competition among commercial banks and with captive finance companies of automobile manufacturers has reduced yields and volume. Additionally, rising fuel costs and uncertainties regarding the economy have led to a decline in consumer confidence, affecting automobile sales. As commerce on Long Island strengthened, commercial loans and mortgages offered continuing opportunity.

The remaining significant components of the loan portfolio are residential mortgages at $155,107,000, up 18.4 percent from $131,006,000; home equity loans at $76,361,000, down 5.5 percent from $80,775,000; and construction loans at $80,687,000, up 19.7 percent from $67,411,000. Current economic trends indicate a slowing housing market, as inventories of unsold homes increased and interest rates gradually increased.

The following table categorizes total loans (net of unearned discounts) at December 31: (in thousands)

	2006				2005				2004				2003				2002
Commercial, financial & agricultural loans	$	182,840	20.5	%	$	179,523	19.8	%	$	158,205	19.2	%	$	171,616	20.4	%	$	150,130	19.0	%
Commercial real estate mortgages		292,458	32.8	%		308,436	34.1	%		262,262	31.8	%		232,119	27.7	%		183,501	23.3	%
Real estate - construction loans		80,687	9.1	%		67,411	7.5	%		50,455	6.1	%		30,461	3.6	%		36,558	4.7	%
Residential mortgages (1st and 2nd liens)		155,107	17.4	%		131,006	14.5	%		114,969	13.9	%		113,979	13.6	%		94,864	12.0	%
Home equity loans		76,361	8.6	%		80,775	8.9	%		75,486	9.1	%		60,397	7.2	%		44,349	5.6	%
Consumer loans		103,102	11.5	%		132,930	14.7	%		162,206	19.7	%		229,711	27.4	%		277,633	35.2	%
Other loans		892	0.1	%		4,956	0.5	%		1,847	0.2	%		778	0.1	%		1,522	0.2	%
Total loans (net of unearned discounts)	$	891,447	100	%	$	905,037	100	%	$	825,430	100	%	$	839,061	100	%	$	788,557	100	%

11

Non-Performing Loans

Generally, recognition of interest income is discontinued when reasonable doubt exists as to whether interest can be collected. Ordinarily, loans no longer accrue interest when 90 days past due. When a loan stops accruing interest, all interest accrued in the current year, but not collected, is reversed against interest income in the current year. Any interest accrued in prior years is charged against the allowance for loan losses. Loans start accruing interest again when they become current as to principal and interest, and when, in the opinion of management, they can be collected in full. All non-performing loans, of a material amount, are reflected in the foregoing tables.

The following table shows non-accrual, past due, and restructured loans at December 31: (in thousands)

	2006		2005		2004		2003		2002
Loans accruing but past due contractually 90 days or more	$	68	$	—	$	—	$	1,286	$	349
Loans not accruing interest		824		4,459		5,337		1,784		1,560
Restructured loans		—		—		27		35		198
Total	$	892	$	4,459	$	5,364	$	3,105	$	2,107

Interest on loans that are restructured or are no longer accruing interest would have amounted to about $68,000 for 2006 under the contractual terms of those loans. Suffolk records the payment of interest on such loans as a reduction of principal. Interest income recognized on restructured and non-accrual loans was immaterial for the years 2006, 2005, and 2004. Suffolk has a formal procedure for internal credit review to more precisely identify risk and exposure in the loan portfolio. A single credit, the circumstances of which are particular to that loan, was charged off during 2006. Management does not believe that it is reflective of a systemic weakness in the loan portfolio or of the underwriting standards and procedures.

Summary of Loan Losses and Allowance for Loan Losses

The allowance for loan losses is determined by continuous analysis of the loan portfolio. That analysis includes changes in the size and composition of the portfolio, historical loan losses, industry-wide losses, current and anticipated economic trends, and details about individual loans. It also includes estimates of the actual value of collateral and other possible sources of repayment. There can be no assurance that the allowance is, in fact, adequate. When a loan, in full or in part, is deemed uncollectible, it is charged against the allowance. This happens when it is well past due and the borrower has not shown the ability or intent to make the loan current, or the borrower does not have enough assets to pay the debt, or the value of the collateral is less than the balance of the loan and not likely to improve soon. Residential real estate and consumer loans are analyzed as a group and not individually because of the large number of loans, small balances, and historically low losses. In the future, the provision for loan losses may change as a percentage of total loans. The percentage of net charge-offs to average net loans during 2006 was 0.36 percent, compared to net recoveries of 0.01 percent in 2005, and net charge-offs of 0.28 percent during 2004. The ratio of the allowance for loan losses to loans, net of discounts, was 0.85 percent at the end of 2006, down from 1.09 percent in 2005 and 0.99 percent in 2004. A summary of transactions follows: (in thousands)

Year ended December 31,	2006		2005		2004		2003		2002
Allowance for loan losses, January 1,	$	9,828	$	8,210	$	8,551	$	8,695	$	8,825
Loans charged-off:
Commercial, financial & agricultural loans		3,547		180		2,130		110		27
Commercial real estate mortgages		—		—		—		—		—
Real estate - construction loans		—		—		—		—		—
Residential mortgages (1st and 2nd liens)		—		—		—		—		—
Home equity loans		—		—		—		62		—
Consumer loans		210		428		1,059		1,835		1,826
Lease finance		—		—		—		—		—
Other loans		—		—		—		5		—
Total Charge-offs	$	3,757	$	608	$	3,189	$	2,012	$	1,853

12

Loans recovered after being charged-off	2006		2005			2004		2003		2002
Commercial, financial & agricultural loans		56		46			50		23		33
Commercial real estate mortgages		—		—			—		—		—
Real estate – construction loans		—		—			—		—		—
Residential mortgages (1st and 2nd liens)		—		—			—		—		—
Home equity loans		—		—			—		—		—
Consumer loans		458		605			825		913		310
Lease finance		—		—			—		—		—
Other loans		—		—			—		—		—
Total recoveries	$	514	$	651		$	875	$	936	$	343
Net loans charged-off (recovered)		3,243		(43	)		2,314		1,076		1,510
Provision for loan losses		966		1,575			1,973		932		1,380
Allowance for loan losses, December 31,	$	7,551	$	9,828		$	8,210	$	8,551	$	8,695

The following table summarizes the allowance for loan losses allocated by loan type: (dollars in thousands)

As of December 31,	2006		% of Total		2005		% of Total		2004		% of Total		2003		% of Total		2002		% of Total
Commercial, financial & agricultural loans	$	2,852	37.7	%	$	5,209	53.0	%	$	4,004	48.8	%	$	3,072	35.9	%	$	3,213	37.0	%
Commercial real estate mortgages		2,139	28.3	%		2,431	24.7	%		2,597	31.6	%		2,939	34.4	%		2,760	31.7	%
Real estate – construction loans		518	6.9	%		388	4.0	%		261	3.2	%		208	2.4	%		305	3.5	%
Residential mortgages (1st and 2nd liens)		190	2.5	%		162	1.7	%		215	2.6	%		233	2.7	%		143	1.6	%
Home equity loans		450	6.0	%		502	5.1	%		540	6.6	%		551	6.4	%		468	5.4	%
Consumer loans		272	3.6	%		434	4.4	%		593	7.2	%		1,389	16.3	%		1,598	18.4	%
Unallocated allowance		1,130	15.0	%		702	7.1	%		—	0.0	%		159	1.9	%		208	2.4	%
Allowance for loan losses	$	7,551	100	%	$	9,828	100	%	$	8,210	100	%	$	8,551	100	%	$	8,695	100	%

The following table presents information concerning loan balances and asset quality: (dollars in thousands)

Year ended December 31,	2006			2005			2004			2003			2002
Loans, net of discounts:
Average	$	901,351		$	863,057		$	825,348		$	816,058		$	781,521
At end of period		891,447			905,037			825,430			839,061			790,450
Non-performing assets/total loans, net of discounts		0.09	%		0.49	%		0.65	%		0.22	%		0.22	%
Non-performing assets/total assets		0.06			0.32			0.40			0.14			0.14
Ratio of net charge-offs (recoveries)/average net loans		0.36			(0.01	)		0.28			0.13			0.19
Net charge-offs (recoveries)/net loans at December 31,		0.36			(0.00	)		0.28			0.13			0.19
Allowance for loan losses/loans, net of discounts		0.85			1.09			0.99			1.02			1.10

I nterest Expense

Interest expense in 2006 was $20,499,000, up from $11,312,000 the year before, and $7,379,000 during 2004. Most interest was paid for the deposits of individuals, businesses, and various governments and their agencies. Short-term borrowings include federal funds purchased (short-term lending by other banks), securities sold under agreements to repurchase, and Federal Home Loan Bank borrowings. The Federal Reserve Bank discount window was available though not used during 2006. Short-term borrowings averaged $137,511,000 during 2006, $63,169,000 during 2005, and $3,842,000 during 2004.

De posits

Average interest-bearing deposits decreased to $721,630,000 in 2006, down 7.5 percent from $779,962,000 in 2005. Saving, N.O.W., and money market deposits decreased during 2006, averaging $475,634,000, down 15.2 percent from 2005 when they averaged $561,137,000. Average time certificates of less than $100,000 totaled $199,109,000, up 0.1 percent from $198,856,000 in 2005. Average time certificates of $100,000 or more totaled $46,887,000, up 134.8% from $19,969,000 during 2005. The Bank did not have any brokered deposits as of December 31, 2006. Each of the Bank’s demand deposit accounts has a related non-interest-bearing sweep account. The sole purpose of the sweep accounts is to reduce the non-interest-bearing reserve balances that the Bank is required to maintain with the Federal Reserve Bank, and thereby increase funds available for investment. Although the sweep accounts are classified as saving accounts for regulatory purposes, they are included in demand deposits in the accompanying consolidated statements of condition.

13

The following table classifies average deposits for each of the periods indicated: (in thousands)

	2006				2005				2004
	Average		Average Rate Paid		Average		Average Rate Paid		Average		Average Rate Paid
Demand deposits	$	431,067			$	423,214			$	401,718
Saving deposits		301,457	0.69	%		364,837	0.54	%		388,712	0.42	%
N.O.W. & money market deposits		174,177	1.55			196,300	0.87			211,956	0.53
Time certificates of $100,000 or more		46,887	4.34			19,969	2.72			19,965	1.84
Other time deposits		199,109	3.37			198,856	2.46			200,283	2.10
Total deposits	$	1,152,697			$	1,203,176			$	1,222,634

At December 31, 2006, the remaining maturities of time certificates of $100,000 or more were as follows: (in thousands)

3 months or less	$	74,712
Over 3 through 6 months		1,968
Over 6 through 12 months		1,549
Over 12 months		3,613
Total	$	81,842

S hort-Term Borrowings

Suffolk uses short-term funding when it is advantageous to do so in comparison with the alternatives. As the yield curve remained inverted, short-term funding activity increased during 2006. This includes borrowings from the Federal Home Loan Bank, lines of credit for federal funds with correspondent banks and retail sale-repurchase agreements. Average balances of federal funds purchased were $2,332,000 and $781,000 for 2006 and 2005, respectively. Average balances of Federal Home Loan Bank borrowings were $78,833,000 during 2006 and $27,961,000 in 2005. Average balance of repurchase agreements were $56,346,000 during 2006 and $34,427,000 during 2005.

Other Income

Other income increased to $10,672,000 during 2006, up 5.2 percent from $10,145,000 during 2005, which was down 17.5 percent from $12,294,000 during 2004. Service charges on deposit accounts decreased 2.2 percent from 2005 to 2006, and remained flat from 2004 to 2005. Other service charges were up 21.8 percent and 1.0 percent for the same periods, respectively. Fiduciary fees in 2006 totaled $1,252,000, up 5.8 percent from 2005 when they amounted to $1,183,000, which was down 2.0 percent from 2004, at $1,207,000. There were no net gains or losses on sales of securities in 2006. Net losses on sales of securities amounted to $22,000 in 2005. Net gains on sales of securities amounted to $1,994,000 in 2004.

Other Expense

Other expense during 2006 was $39,975,000, up 6.7 percent from 2005 when it was $37,453,000, which was up 2.3 percent from $36,621,000 in 2004. Increases were primarily due to increase in salaries and employee benefits, up 7.5 percent from 2006 to 2005, and in other operating expense, up 6.4 percent from 2005 to 2006. During 2006, non-interest expense grew at 6.7 percent. Deposits meeting certain regulatory criteria as to size held at SCNB are insured by the Federal Deposit Insurance Corporation (“FDIC”). The Federal Deposit Insurance Reform Act of 2005 merged the Bank Insurance Fund with the Savings Association Insurance Fund to form the Deposit Insurance Fund (“DIF”). The FDIC maintains the DIF by assessing depository institutions an insurance premium. The amount each institution is assessed is based upon statutory factors that include the balance of insured deposits as well as the degree of risk the institution poses to the insurance fund. The FDIC granted a one-time initial assessment credit to recognize institution’s past contributions to the DIF. For SCNB, this credit totaled $970,000. Up to ninety (90) percent of the credit may be applied to the annual assessment with the remainder carried forward to the next year. Therefore, in 2007, approximately $586,000 of the one-time initial assessment credit will offset anticipated DIF premiums of $652,000. The remainder of the one-time initial assessment credit will be carried forward into 2008. The provision for income taxes decreased from $13,376,000, for an effective income tax rate of 37.7%, to $12,813,000, for an effective income tax rate of 36.1%, primarily as a result of increased investment in municipal securities.

Interest Rate Sensitivity

Interest rate “sensitivity” is determined by the date when each asset and liability in Suffolk’s portfolio can be re-priced. Sensitivity increases when interest-earning assets and interest-bearing liabilities cannot be re-priced at the same time. While this analysis presents the volume of assets and liabilities repricing in each period of time, it does not consider how quickly various assets and liabilities might actually be repriced in response to changes in interest rates. Management reviews its interest rate sensitivity regularly and adjusts its asset/liability management strategy accordingly. Because the interest rates of assets and liabilities vary according to their maturity, management may selectively mismatch the repricing of assets and liabilities to take advantage of temporary or projected differences between short- and long-term interest rates.

14

The following table reflects the sensitivity of Suffolk’s assets and liabilities at December 31, 2006: (dollars in thousands)

Maturity	Less than 3 Months			3 to 6 Months			7 to 12 Months			More Than 1 Year			Not Rate Sensitive			Total
Interest-earning assets
Domestic loans (1) (net of unearned discount)	$	286,886		$	55,622		$	87,690		$	459,207		$	2,042		$	891,447
Investment securities (2)		12,370			11,203			37,941			351,959			4,869			418,342
Federal funds sold		—			—			—			—			—			—
Total interest-earning assets	$	299,256		$	66,825		$	125,631		$	811,166		$	6,911		$	1,309,789
Demand deposits and interest-bearing liabilities
Demand deposits (3)	$	21,461		$	21,461		$	42,922		$	341,080		$	—		$	426,924
N.O.W. & money market accounts (4)		4,161			87,758			8,322			66,572			—			166,813
Borrowings		120,135			—			—			—			—			120,135
Interest-bearing deposits (5)		270,801			63,867			28,430			182,240			—			545,338
Total demand deposits & interest-bearing liabilities	$	416,558		$	173,086		$	79,674		$	589,892		$	—		$	1,259,210
Gap	$	(117,302	)	$	(106,261	)	$	45,957		$	221,274		$	6,911		$	50,579
Cumulative difference between interest-earning assets and interest-bearing liabilities	$	(117,302	)	$	(223,563	)	$	(177,606	)	$	43,668		$	50,579
Cumulative difference/total assets		(8.42	)%		(16.05	)%		(12.75	)%		3.14	%		3.63	%

Footnotes to Interest Rate Sensitivity

(1) Based on contractual maturity and instrument repricing date, if applicable; projected prepayments and prepayments of principal based on experience.

(2) Based on contractual maturity, and projected prepayments based on experience. FRB and FHLB stock is not considered rate-sensitive.

(3) Based on experience of historical stable core deposit relationships.

(4) N.O.W. and money market accounts are assumed to decline over a period of five years.

(5) Fixed-rate deposits and deposits with fixed pricing intervals are reflected as maturing in the period of contractual maturity. Saving accounts are assumed to decline over a period of five years.

At December 31, 2006, interest-earning liabilities with maturities of less than one year exceed interest-bearing assets of similar maturity. This cumulative gap might result in decreased net interest income if interest rates increase during the next twelve months. If interest rates decline, net interest income might increase. However, interest-earning assets with maturities of greater than one year exceed interest-bearing liabilities of similar maturity. This cumulative gap might result in increased net interest income if interest rates increase beyond twelve months. If interest rates decline, net interest income might decrease.

Market Risk

Market risk is the risk that a financial instrument will lose value as the result of adverse changes in market prices, interest rates, foreign currency exchange rates, commodity prices, or the prices of equity securities. Suffolk’s primary exposure to market risk is to changing interest rates.

Monitoring and managing this risk is an important part of Suffolk’s asset/liability management process. It is governed by policies established by its Board of Directors. These policies are reviewed and approved annually. The Board delegates responsibility for asset/liability management to the Asset/Liability Committee (“ALCO”). ALCO then develops guidelines and strategies to implement the policy.

Interest Rate Risk

Interest rate risk is the sensitivity of earnings to changes in interest rates. As interest rates change, interest income and expense also change, thereby changing net interest income (“NII”). NII is the primary component of Suffolk’s earnings. ALCO uses a detailed and dynamic model to quantify the effect of sustained changes in interest rates on NII. While ALCO routinely monitors simulated NII sensitivity two years into the future, it uses other tools to monitor longer term interest rate risk.

The model measures the effect in the future of changing interest rates on both interest income and expense for all assets and liabilities, as well as for derivative financial instruments that do not appear on the balance sheet. The results are compared to ALCO policy limits that specify a maximum effect on NII one year in the future, assuming no growth in assets or liabilities, or 200 basis point (“bp”) change in interest rates upward and downward.

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Following is Suffolk’s NII sensitivity as of December 31, 2006. Suffolk’s Board has approved a policy limit of 12.5 percent.

	Estimated NII Sensitivity to December 31, 2007
Rate Change
+200 basis point rate shock	0.70	%
-200 basis point rate shock	(0.90	)%

These estimates should not be interpreted as Suffolk’s forecast, and should not be considered as indicative of management’s expectations for operating results. They are hypothetical estimates that are based on many assumptions including: the nature and time of changes in interest rates, the shape of the “yield curve” (variations in interest rates for financial instruments of varying maturity at a given moment in time), prepayments on loans and securities, deposit outflows, pricing on loans and deposits, and the reinvestment of cash flows from assets and liabilities, among other things. While these assumptions are based on management’s best estimate of current economic conditions, Suffolk cannot give any assurance that they will actually predict results, nor can they anticipate how the behavior of customers and competitors may change in the future.

Factors that may affect actual results include: prepayment and refinancing of loans other than as assumed, interest rate change caps and floors, re-pricing intervals on adjustable rate instruments, changes in debt service on adjustable rate loans, and early withdrawal of deposits. Actual results may also be affected by actions ALCO takes in response to changes in interest rates, actual or anticipated.

When appropriate, ALCO may use off-balance-sheet instruments such as interest rate floors, caps, and swaps to hedge its position with regard to interest rate risk. The Board of Directors has approved a hedging policy statement that governs the use of such instruments. As of December 31, 2006, there were no derivative financial instruments outstanding.

The following table illustrates the contractual sensitivity to changes in interest rates of the Company’s total loans, net of discounts, not including overdrafts and loans not accruing interest, together totaling $2,042,000 at December 31, 2006: (in thousands)

Interest rate provision	Due Within 1 Year		After 1 but Before 5 Years		After 5 Years		Total
Predetermined rates	$	122,318	$	149,512	$	41,725	$	313,555
Floating or adjustable rates		307,917		211,775		57,421		577,113
Total	$	430,235	$	361,287	$	99,146	$	890,668

The following table illustrates the contractual sensitivity to changes in interest rates on the Company’s commercial, financial, agricultural, and real estate construction loans not including non-accrual loans totaling approximating $576,000 at December 31, 2006: (in thousands)

	Due Within 1 Year		After 1 but Before 5 Years		After 5 Years		Total
Commercial, financial & agricultural
Predetermined rates		23,881		40,948		2,511		67,340
Floating or adjustable rates		113,735		1,188		—		114,923
	$	137,616	$	42,136	$	2,511	$	182,263
Real estate construction
Predetermined rates		1,308		0		0		1,308
Floating or adjustable rates		69,080		10,299		—		79,379
	$	70,388	$	10,299	$	—	$	80,687
Total	$	208,004	$	52,435	$	2,511	$	262,950

Asset/Liability Management & Liquidity

The Asset/Liability Management Committee reviews Suffolk’s financial performance and compares it to the asset/liability management policy. The committee includes four outside directors, executive management, the senior lenders, the comptroller, and the head of risk management. It uses computer simulations to quantify interest rate risk and to project liquidity. The simulations also help the committee to develop contingent strategies to increase net interest income. The committee always assesses the impact of any change in strategy on Suffolk’s ability to make loans and repay deposits. Only strategies and policies that meet regulatory guidelines and that are appropriate under the economic and competitive circumstances are considered by the committee. Suffolk has not used forward contracts or interest rate swaps to manage interest rate risk.

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Contractual and Off-Balance-Sheet Obligations

Following is a table describing certain liabilities not included in Suffolk’s consolidated statement of condition in the period in which they are due: (in thousands of dollars)

Contractual obligations	Total		Less than 1 year		1 - 3 years		3 - 5 years		More than 5 years
Federal Home Loan Bank borrowings & repurchase agreements	$	120,135	$	120,135	$	—	$	—	$	—
Time deposits		273,961		237,453		21,281		15,185		43
Operating lease obligations		10,218		996		1,969		1,832		5,421
Purchase obligations		4,050		1,503		2,142		405		—
Total	$	408,364	$	360,087	$	25,392	$	17,422	$	5,464

Amounts listed as purchase obligations represent agreements to purchase services for Suffolk’s core banking system.

Suffolk has not used, and has no intention to use, any significant off-balance sheet financing arrangements for liquidity purposes. Its primary financial instruments with off-balance sheet risk are limited to loan servicing for others and obligations to fund loans to customers pursuant to existing commitments.

Capital Resources

Primary capital, including stockholders’ equity, not including the net unrealized gain (loss) on securities available for sale, net of tax, the comprehensive loss on the unfunded projected benefit obligation of the pension plan, and the allowance for loan losses, amounted to $120,187,000 at year-end 2006, compared to $114,107,000 at year-end 2005 and $112,951,000 at year-end 2004. During 2006, Suffolk repurchased 172,991 shares for an aggregate price of $5,673,747. Management determined that this would increase leverage while preserving capital ratios well above regulatory requirements.

The following table presents Suffolk’s capital ratio and other related ratios for each of the past five years: (dollars in thousands)

	2006 (1)			2005 (1)			2004 (1)			2003 (1)			2002 (1)
Primary capital at year-end	$	120,187		$	114,107		$	112,951		$	104,187		$	109,103
Primary capital at year-end as a percentage of year-end:
Total assets plus allowance for loan losses		8.58	%		8.05	%		8.33	%		7.79	%		8.51	%
Loans, net of unearned discounts		13.48	%		12.61	%		13.68	%		12.42	%		13.84	%
Total deposits		10.55	%		9.85	%		9.43	%		8.77	%		9.55	%

(1) Capital ratios do not include the effect of SFAS No. 115, “Accounting for Certain Investments in Debt and Investment Securities,” nor SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans – an amendment of FASB Statements No. 87, 88, 106 and 132(R).”

In 2000, the Board adopted a policy whereby management will maximize both return on average equity and earnings-per-share, and therefore shareholder value, while maintaining the regulatory standard of “well capitalized.” That standard is 10 percent Total Risk-Based Capital, 6 percent Tier 1 Capital, and 5 percent Leverage Capital. When capital exceeds that standard by more than a small cushion over what is expected to be required to maintain the “well-capitalized” standard during the current quarter, shares may be repurchased as they become available at prices that remain accretive to earnings-per-share in transactions under SEC rule 10-b 18 and in private purchases. When capital expected to be required during the current quarter does not exceed the standard, repurchases will not be made. Further, the dividend reinvestment program will automatically follow the same standard, purchasing shares in the market when Suffolk is in the market to repurchase shares, and issuing from the reserve when it is not. Each of these replaces the prior practice of authorizing the repurchase of a specific number of shares by Suffolk, or the purchase or issuance of shares by the dividend reinvestment program without specific reference to capital ratios.

The following table details repurchases during 2006:

Year ending	Total shares repurchased	Average price per share		Aggregate cost
December 31, 2006	172,991	$	32.80	$	5,673,747

Suffolk measures how effectively it uses capital by two widely accepted performance ratios: return on average assets and return on average common stockholders’ equity. The return in 2006 on average assets of 1.61 percent and average common equity of 22.16 percent compared to 2005 when returns were 1.59 percent and 22.18 percent, respectively.

All dividends must conform to applicable statutory requirements. Suffolk Bancorp’s ability to pay dividends depends on Suffolk County National Bank’s ability to pay dividends. Under 12 USC 56-9, a national bank may not pay a dividend on its common stock if the dividend would exceed net undivided profits then on hand. Further, under 12 USC 60, a national bank must obtain prior approval from the

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Office of the Comptroller of the Currency to pay dividends on either common or preferred stock that would exceed the bank’s net profits for the current year combined with retained net profits (net profits minus dividends paid during that period) of the prior two years. The amount the Bank currently has available to pay dividends is approximately $31,752,000.

Risk-Based Capital and Leverage Guidelines

The Federal Reserve Bank’s risk-based capital guidelines call for bank holding companies to require minimum ratios of capital to risk-weighted assets, which include certain off-balance-sheet activities, such as standby letters of credit. The guidelines define capital as being “core,” or “Tier 1” capital, which includes common stockholders’ equity; a limited amount of perpetual preferred stock; minority interest in unconsolidated subsidiaries, less goodwill; or “supplementary” or “Tier 2” capital, which includes subordinated debt, redeemable preferred stock, and a limited amount of the allowance for loan losses. All bank holding companies must meet a minimum ratio of total qualifying capital to risk-weighted assets of 8.00 percent, of which at least 4.00 percent should be in the form of Tier 1 capital. At December 31, 2006 Suffolk’s ratios of core capital and total qualifying capital (core capital plus Tier 2 capital) to risk-weighted assets were 10.56 percent and 11.28 percent, respectively.

D iscussion of New Accounting Pronouncements

In December 2004, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standard (“SFAS”) No. 123R, “Share-Based Payment” (SFAS 123R). This statement is a revision of SFAS No. 123, “Accounting for Stock-Based Compensation,” and supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees.” SFAS 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values. On January 1, 2006, Suffolk adopted the provisions of SFAS No. 123(R), which have been recorded in the accompanying consolidated statement of financial condition and consolidated results of operations.

On March 29, 2005, the SEC released Staff Accounting Bulletin (“SAB”) 107, “Share-Based Payments” (“SAB 107”). The interpretations in SAB 107 express the views of the SEC staff regarding the application of SFAS No. 123(R). Among other things, SAB 107 provides interpretive guidance about the interaction of Statement 123(R) and certain SEC rules and regulations. It also provides the staff’s views regarding the valuation of share-based payments by public companies. Suffolk has adopted the provisions of SAB 107 which did not have a material effect on its consolidated financial condition and consolidated results of operations.

In May 2005, FASB issued Statement No. 154, “Accounting Changes and Error Corrections – a replacement of APB Opinion No. 20 and FASB Statement No. 3.” This statement changes the requirements for the accounting for and reporting of a change in accounting principle. Opinion 20 previously required that most voluntary changes in accounting principle be recognized by including in net income of the period of the change the cumulative effect of changing to the new principle. Statement No. 154 requires retrospective application to prior periods, financial statements of changes in accounting principle, where practicable, and limits retrospective application of a change to direct effects of the change in accounting principle. Indirect effects of a change in accounting principle should be recognized in the period of accounting change. This statement is effective for accounting changes made in fiscal years after December 15, 2005. Suffolk has adopted the provisions of FAS No. 154 which did not have a material effect on its consolidated financial condition and consolidated results of operations.

In November 2005, the FASB issued FASB Staff Position (“FSP”) SFAS 115-1 and 124-1, “The Meaning of Other-Than Temporary Impairment and Its Application to Certain Investments.” This FSP nullifies certain requirements of EITF-03-1 on this topic and provides additional guidance on when an investment in a debt or equity security should be considered impaired and when that impairment should be considered other-than-temporary and recognized as a loss in earnings. Specifically, the guidance clarifies that an investor should recognize an impairment loss no later than when the impairment is deemed other-than-temporary, even if a decision to sell has not been made. The FSP also required certain disclosures about unrealized losses that have not been recognized as other-than-temporary impairments. The amount of any other-than-temporary impairment that needs to be recognized will continue to be dependent on market conditions, the occurrence of certain events or changes in circumstances relative to an investee, and an entity’s intent and ability to hold the impaired investment at the time of the valuation. FSP SFAS 115-1 and 124-1 was effective for reporting periods beginning after December 15, 2005. Adoption of the FSP did not have a material impact on the Company’s financial position or results of operations.

In March 2006, FASB issued Statement No. 156, “Accounting for Servicing of Financial Assets – an amendment of FASB Statement No. 140.” This statement addresses the recognition and measurement of separately recognized servicing assets and liabilities. It requires an entity to recognize a servicing asset or servicing liability each time it undertakes an obligation to service a financial asset by entering into a servicing contract in certain situations. Statement No. 156 requires all separately recognized servicing assets and servicing liabilities to be initially measured at fair value, if practicable. An entity is permitted to choose from two measurement methods for each class of separately recognized servicing assets and servicing liabilities: an amortization method or fair value measurement method. This statement also permits a one-time reclassification of available-for-sale securities to trading securities by entities with recognized servicing rights. Separate presentation of servicing assets and servicing liabilities subsequently measured at fair value in the statement of financial position and additional disclosures for all separately recognized servicing assets and servicing liabilities are required. This statement is effective for fiscal years beginning after September 15, 2006. The impact of FAS. No. 156 on Suffolk’s financial condition, results of operations, and disclosures has been determined not to be material.

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On July 13, 2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes - An Interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109, Accounting for Income Taxes. FIN 48 also prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The provisions of FIN 48 are to be applied to all tax positions upon initial adoption of this standard. Only tax positions that meet a “more-likely-than-not” recognition threshold at the effective date may be recognized or continue to be recognized upon adoption of FIN 48. The cumulative effect of applying the provisions of FIN 48 are to be reported as an adjustment to the opening balance of retained earnings (or other appropriate components of equity or net assets in the statement of financial position) for that fiscal year. The new interpretation also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The provisions of FIN 48 are effective for fiscal years beginning after December 15, 2006. The Company is still evaluating the adoption of FIN 48, but preliminarily estimates that the adoption of the standard in the first quarter of 2007 may result in a credit adjustment to opening retained earnings in the range of $850,000 to $1,845,000.

Bank tax provisions of New York State Article 32 allows banking corporations to exclude from income 60 percent of the dividends it has received from subsidiaries such as a Real Estate Investment Trust (REIT). In recent years, similar provisions in the tax codes of other states have been repealed as those and other states have attempted to generate additional tax revenue. On various occasions over the course of a number of years, the tax commissioner of New York State has proposed the elimination of this provision, raising the question for New York State banking corporations as to whether this exclusion would remain in effect. In previous years Suffolk has provided for the potential retroactive repeal of this provision. Newly elected New York State Governor Eliot Spitzer has proposed the prospective elimination of this benefit in his proposed 2007 budget. Going forward, the Company may not realize the benefits of the exclusion from income 60 percent of the dividends received from the REIT resulting in a higher effective state income tax rate.

In September 2006, FASB issued Statement No. 157, “Fair Value Measurements.” This statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. The definition of fair value retains the exchange price notion, however this statement clarifies that the exchange price is the price in an orderly transaction between market participants to sell the asset or transfer the liability in the principal market for the asset or liability. This statement emphasizes that fair value is a market-based measurement, not an entity-specific measurement, therefore a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability. This statement clarifies that market participant assumptions include assumptions about risk, the risk inherent in a particular valuation technique used to measure fair value and/or the risk inherent in the inputs to the valuation technique, as well as the effect of credit risk on the fair value of liabilities. This statement also expands disclosures about the use of fair value to measure assets and liabilities in interim and annual periods, focusing on the inputs used to measure fair value. This statement is effective for fiscal years beginning after November 15, 2007. Suffolk is currently evaluating the impact of FAS. No. 157 on its financial condition, results of operations, and disclosures.

In September 2006, FASB issued Statement No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans – an amendment of FASB Statements No. 87, 88, 106 and 132(R).” This statement requires an employer that is a business entity and sponsors one or more single-employer defined benefit plans to recognize the funded status of a benefit plan in its statement of financial position; recognize as a component of other comprehensive income, net of tax, the gains or losses and prior service costs or credits that arise during the period but are not recognized as components of net periodic benefit cost pursuant to FASB No. 87 or No. 106; measure defined benefit plan assets and obligation as of the date of the employer’s fiscal year-end statement of financial position (with limited exceptions); and disclose in the notes to financial statements additional information about certain effects of net periodic benefit cost for the next fiscal year that arise from delayed recognition of the gains or losses, prior service costs or credits, and transition asset and obligation. Upon initial application of this statement and subsequently, an employer should continue to apply the provisions in Statements 87, 88, and 106 in measuring plan assets and benefit obligations as of the date of its statement of financial position and in determining the amount of net periodic benefit cost. An employer with publicly traded equity securities is required to initially recognize the funded status of a defined benefit postretirement plan and to provide the required disclosures as of the end of the fiscal year ending after December 15, 2006. Suffolk has adopted the provisions of FAS. No. 158, which have been recorded in the accompanying consolidated statement of condition and disclosures.

On September 13, 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 108, which provides guidance on the consideration of the effects of prior year misstatements in quantifying current year misstatements for the purpose of a materiality assessment. The guidance is effective for fiscal years ending after November 15, 2006. The adoption of SAB No. 108 did not have a material effect on Suffolk’s financial condition, results of operations, and disclosures.

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Critical Accounting Policies, Judgments, and Estimates

The accounting and reporting policies of Suffolk conform to accounting principles generally accepted in the United States of America and general practices in the financial services industry. The preparation of financial statements in conformity with these accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the accompanying notes. Actual results in the future could differ from those estimates.

Suffolk considers that the determination of the allowance for loan losses involves a higher degree of judgment and complexity than its other significant accounting policies. The allowance for loan losses is calculated to maintain a reserve believed by management to be sufficient to absorb estimated credit losses. Management’s determination of the adequacy of the allowance is based on periodic evaluations of the loan portfolio and other relevant factors. This evaluation is inherently subjective as it requires material estimates, including, among others, the expected probability of default; the amount of loss in the event of default; the expected usage of loan commitments; the amounts and timing of cash flows expected in the future from impaired loans and mortgages; and an additional factor for potential loan losses based on historical experience. Management also considers economic conditions, uncertainties in estimating losses, and inherent risks in the loan portfolio. All of these factors may change significantly in the future. To the extent that actual results differ from management’s estimates, additional provisions for loan losses may be required that could reduce earnings in future periods.

Suffolk recognizes deferred-tax assets and liabilities. Deferred income taxes occur when income taxes are allocated through time. Some items are temporary resulting from differences in the timing of a transaction under generally accepted accounting principles (“GAAP”), and for the computation of income tax. Examples would include the future tax effects of temporary differences for such items as deferred compensation and the provision for loan losses. Estimates of deferred tax assets are based upon evidence available to management that future realization is more likely than not. If management determines that Suffolk may be unable to realize all or part of net deferred tax assets in the future, a direct charge to income tax expense may be required to reduce the recorded value of the net deferred tax asset to the amount that management expects to realize.

Business Risks and Uncertainties

This annual report contains some statements that look to the future. These may include remarks about Suffolk Bancorp, the banking industry, and the economy in general. Factors affecting Suffolk Bancorp include particularly, but are not limited to: changes in interest rates; increases or decreases in retail and commercial economic activity in Suffolk’s market area; variations in the ability and propensity of consumers and businesses to borrow, repay, or deposit money, or to use other banking and financial services. Further, it could take Suffolk longer than anticipated to implement its strategic plans to increase revenue and manage non-interest expense, or it may not be possible to implement those plans at all. Finally, new and unanticipated legislation, regulation, or accounting standards may require Suffolk to change its practices in ways that materially change the results of operations. Each of the factors may change in ways that management does not now foresee. These remarks are based on current plans and expectations. They are subject, however, to a variety of uncertainties that could cause future results to vary materially from Suffolk’s historical performance, or from current expectations.

Management’s Report on Internal Control over Financial Reporting

The management of Suffolk Bancorp is responsible for establishing and maintaining adequate internal control over financial reporting. Suffolk Bancorp’s internal control system was designed to provide reasonable assurance to the company’s management and Board of Directors regarding the preparation and fair presentation of published financial statements.

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

Suffolk Bancorp management assessed the effectiveness of the company’s internal control over financial reporting as of December 31, 2006. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework. Based on our assessment and those criteria we have determined that, as of December 31, 2006, the company’s internal control over financial reporting is effective.

Suffolk Bancorp’s independent registered public accounting firm has issued its report on our assessment of the company’s internal control over financial reporting. This report appears on Page 39.

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CONSOLIDATED STATEMENTS OF CONDITION

	December 31,
	2006			2005
ASSETS
Cash and Due From Banks	$	43,575,754		$	48,530,407
Investment Securities:
Available for Sale, at Fair Value		403,245,550			400,037,573
Held to Maturity (Fair Value of $15,646,925 and $17,884,527, respectively)
Obligations of States and Political Subdivisions		9,913,123			11,377,803
Federal Reserve Bank Stock		637,849			637,849
Federal Home Loan Bank Stock		4,446,200			5,158,200
Corporate Bonds and Other Securities		100,000			100,000
Total Investment Securities		418,342,722			417,311,425
Total Loans		891,486,417			905,080,229
Less: Unearned Discounts		39,916			43,084
Allowance for Loan Losses		7,550,965			9,828,258
Net Loans		883,895,536			895,208,887
Premises and Equipment, Net		22,471,073			22,791,649
Accrued Interest Receivable		7,609,003			6,747,285
Excess of Cost Over Fair Value of Net Assets Acquired		814,445			814,445
Other Assets		15,940,597			18,461,457
TOTAL ASSETS	$	1,392,649,131		$	1,409,865,555
LIABILITIES & STOCKHOLDERS’ EQUITY
Demand Deposits	$	426,923,954		$	424,319,945
Saving, N.O.W., and Money Market Deposits		438,190,636			521,155,530
Time Certificates of $100,000 or more		81,841,699			15,825,053
Other Time Deposits		192,118,700			197,405,982
Total Deposits		1,139,074,989			1,158,706,510
Federal Funds Purchased		—			7,700,000
Repurchase Agreements		53,135,000			37,275,000
Federal Home Loan Bank Borrowings		67,000,000			83,000,000
Dividend Payable on Common Stock		2,253,304			2,081,344
Accrued Interest Payable		3,372,993			1,722,408
Other Liabilities		19,246,498			17,379,534
TOTAL LIABILITIES		1,284,082,784			1,307,864,796
Commitments and Contingent Liabilities (see Note 11)
STOCKHOLDERS’ EQUITY
Common Stock (par value $2.50; 15,000,000 shares authorized, 10,242,291 and 10,406,721 shares outstanding at December 31, 2006 & 2005, respectively)		33,910,979			33,884,340
Surplus		19,931,465			19,439,444
Retained Earnings		67,099,115			58,822,484
Treasury Stock at Par (3,322,100 shares and 3,147,015 shares, respectively)		(8,305,255	)		(7,867,542	)
Accumulated Other Comprehensive Loss, Net of Tax		(4,069,957	)		(2,277,967	)
TOTAL STOCKHOLDERS’ EQUITY		108,566,347			102,000,759
TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY	$	1,392,649,131		$	1,409,865,555

See accompanying notes to consolidated financial statements.

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CONSOLIDATED STATEMENTS OF INCOME

	For the Years ended December 31,
	2006		2005			2004
INTEREST INCOME
Federal Funds Sold	$	281,161	$	90,810		$	309,591
United States Treasury Securities		396,996		385,115			414,506
Obligations of States and Political Subdivisions (tax exempt)		3,529,614		1,968,450			878,691
Obligations of States and Political Subdivisions (taxable)		471,291		271,667			104,543
Mortgage-Backed Securities		7,981,951		9,596,310			10,364,817
U.S. Government Agency Obligations		4,879,061		4,896,096			4,341,882
Corporate Bonds and Other Securities		343,288		147,351			79,677
Loans		68,325,474		58,316,917			51,490,416
Total Interest Income		86,208,836		75,672,716			67,984,123
INTEREST EXPENSE
Saving, N.O.W., and Money Market Deposits		4,791,785		3,688,631			2,754,739
Time Certificates of $100,000 or more		2,034,215		542,709			367,314
Other Time Deposits		6,713,778		4,888,187			4,209,134
Federal Funds Purchased and Repurchase Agreements		2,954,948		1,251,893			392
Interest on Other Borrowings		4,004,768		940,320			47,279
Total Interest Expense		20,499,494		11,311,740			7,378,858
Net Interest Income		65,709,342		64,360,976			60,605,265
Provision for Loan Losses		965,749		1,575,000			1,973,000
Net Interest Income After Provision for Loan Losses		64,743,593		62,785,976			58,632,265
OTHER INCOME
Service Charges on Deposit Accounts		5,547,675		5,670,036			5,658,689
Other Service Charges, Commissions & Fees		3,097,420		2,542,067			2,518,502
Fiduciary Fees		1,252,101		1,182,643			1,207,050
Other Operating Income		774,580		771,550			915,886
Net (Loss) Gain on Sale of Securities Available for Sale		—		(21,723	)		1,993,974
Total Other Income		10,671,776		10,144,573			12,294,101
OTHER EXPENSE
Salaries & Employee Benefits		23,896,752		22,222,712			21,753,835
Net Occupancy Expense		3,950,083		3,763,796			3,128,962
Equipment Expense		2,112,945		2,055,659			2,141,907
Outside Services		2,176,004		2,019,188			1,971,825
FDIC Assessments		153,744		169,045			185,041
Other Operating Expense		7,685,199		7,222,173			7,439,992
Total Other Expense		39,974,727		37,452,573			36,621,562
Income Before Provision for Income Taxes		35,440,642		35,477,976			34,304,804
Provision for Income Taxes		12,813,015		13,376,463			13,429,742
NET INCOME	$	22,627,627	$	22,101,513		$	20,875,062
Average: Common Shares Outstanding		10,279,870		10,570,896			10,882,327
Dilutive Stock Options		23,639		29,318			31,323
Average Total Common Shares and Dilutive Options		10,303,509		10,600,214			10,913,650
EARNINGS PER COMMON SHARE
Basic	$	2.20	$	2.09		$	1.92
Diluted	$	2.20	$	2.09		$	1.91

See accompanying notes to consolidated financial statements.

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CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

	Common Stock		Surplus		Retained Earnings			Treasury Stock			Accumulated Other Comprehensive
											Income (Loss) Securities			Net of Tax Pension			Total			Comprehensive Income
Balance, December 31, 2003	$	33,879,045	$	19,374,972	$	48,887,980		$	(6,505,842	)	$	4,534,095		$	—		$	100,170,250
Net Income		—		—		20,875,062			—			—			—			20,875,062		$	20,875,062
Dividend - Cash		—		—		(8,266,122	)		—			—			—			(8,266,122	)
Purchase of Treasury Stock		—		—		(3,301,687	)		(272,160	)		—			—			(3,573,847	)
Stock Appreciation Rights Exercised		5,295		64,472		—			—			—			—			69,767
Net Change in Unrealized Loss on Securities Available for Sale		—		—		—			—			(3,063,377	)		—			(3,063,377	)		(3,063,377	)
Comprehensive Income																				$	17,811,685
Balance, December 31, 2004	$	33,884,340	$	19,439,444	$	58,195,233		$	(6,778,002	)	$	1,470,718		$	—		$	106,211,733
Net Income		—		—		22,101,513			—			—			—			22,101,513		$	22,101,513
Dividend - Cash		—		—		(8,320,754	)		—			—			—			(8,320,754	)
Purchase of Treasury Stock		—		—		(13,110,948	)		(1,089,540	)		—			—			(14,200,488	)
Other		—		—		(42,560	)		—			—			—			(42,560	)
Net Change in Unrealized Loss on Securities Available for Sale		—		—		—			—			(3,748,685	)		—			(3,748,685	)		(3,748,685	)
Comprehensive Income																				$	18,352,828
Balance, December 31, 2005	$	33,884,340	$	19,439,444	$	58,822,484		$	(7,867,542	)	$	(2,277,967	)	$	—		$	102,000,759
Net Income		—		—		22,627,627			—			—			—			22,627,627		$	22,627,627
Dividend - Cash		—		—		(9,037,469	)		—			—			—			(9,037,469	)
Purchase of Treasury Stock		—		—		(5,241,270	)		(432,477	)		—			—			(5,673,747	)
Stock Appreciation Rights and Stock Options Exercised		26,639		260,110		(72,257	)		(5,236	)		—			—			209,256
Stock Option Expense		—		231,878		—			—			—			—			231,878
Other		—		33		—			—			—			—			33
Net Change in Unrealized Loss on Securities Available for Sale		—		—		—			—			939,592			—			939,592			939,592
Other Comprehensive Loss on Pension Projected Benefit Obligation		—		—		—			—			—			(2,731,582	)		(2,731,582	)		(2,731,582	)
Comprehensive Income																				$	20,835,637
Balance, December 31, 2006	$	33,910,979	$	19,931,465	$	67,099,115		$	(8,305,255	)	$	(1,338,375	)	$	(2,731,582	)	$	108,566,347

See accompanying notes to consolidated financial statements.

23

CONSOLIDATED STATEMENTS OF CASH FLOWS

	For the Years ended December 31,
	2006			2005			2004
NET INCOME	$	22,627,627		$	22,101,513		$	20,875,062
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
CASH FLOWS FROM OPERATING ACTIVITIES
Provision for Loan Losses		965,749			1,575,000			1,973,000
Depreciation and Amortization		2,200,182			2,109,645			2,139,579
Stock Based Compensation		231,878			—			—
Accretion of Discounts		(239,212	)		(324,834	)		(398,396	)
Amortization of Premiums		2,358,689			3,676,946			4,600,668
(Increase) Decrease in Accrued Interest Receivable		(861,718	)		(943,384	)		65,172
(Increase) Decrease in Other Assets		(226,780	)		2,304,635			2,416,955
Increase (Decrease) in Accrued Interest Payable		1,650,585			1,000,836			(77,931	)
Increase (Decrease) in Income Taxes Payable		3,410,675			(479,966	)		317,644
(Decrease) Increase in Other Liabilities		(1,974,959	)		2,507,642			1,837
Net Loss (Gain) on Sale of Securities		—			21,723			(1,993,974	)
Net Cash Provided by Operating Activities		30,142,716			33,549,756			29,919,616
CASH FLOWS FROM INVESTING ACTIVITIES
Principal Payments on Investment Securities		37,683,350			61,231,605			77,880,445
Proceeds from Sale of Investment Securities; Available for Sale		—			8,422,802			88,413,187
Maturities of Investment Securities; Available for Sale		6,500,000			—			3,500,000
Purchases of Investment Securities; Available for Sale		(47,919,748	)		(51,743,399	)		(228,684,740	)
Maturities of Investment Securities; Held to Maturity		4,775,400			8,925,200			6,633,995
Purchases of Investment Securities; Held to Maturity		(2,597,200	)		(11,736,400	)		(6,452,200	)
Loan Disbursements and Repayments, Net		10,347,602			(79,564,058	)		11,317,401
Purchases of Premises and Equipment, Net		(1,879,607	)		(1,896,340	)		(2,364,382	)
Net Cash Provided by (Used in) Investing Activities		6,909,797			(66,360,590	)		(49,756,294	)
CASH FLOWS FROM FINANCING ACTIVITIES
Net (Decrease) Increase in Deposit Accounts		(19,631,521	)		(38,885,805	)		10,096,813
Short-Term Borrowings and Repayments, Net		(7,840,000	)		102,675,000			5,300,000
Dividends Paid to Shareholders		(8,867,708	)		(8,300,804	)		(8,285,870	)
Stock Options and Stock Appreciation Rights Exercised		7			—			7
Treasury Shares Acquired		(5,673,747	)		(14,200,488	)		(3,573,847	)
Director Stock Gain Divestiture		5,803			—			—
Net Cash (Used in) Provided by Financing Activities		(42,007,166	)		41,287,903			3,537,103
Net (Decrease) Increase in Cash and Cash Equivalents		(4,954,653	)		8,477,069			(16,299,575	)
Cash and Cash Equivalents Beginning of Year		48,530,407			40,053,338			56,352,913
Cash and Cash Equivalents End of Year	$	43,575,754		$	48,530,407		$	40,053,338
Supplemental Disclosure of Cash Flow Information
Cash Received During the Year for Interest	$	85,347,118		$	74,729,332		$	68,049,295
Cash Paid During the Year for:
Interest	$	18,848,909		$	10,310,904		$	7,456,789
Income Taxes		8,369,541			14,128,373			12,101,242
Total Cash Paid During Year for Interest & Income Taxes	$	27,218,450		$	24,439,277		$	19,558,031
Non-Cash Investing and Financing:
(Increase) Decrease in Market Value of Investments		(1,592,530	)		6,353,704			5,192,164
(Decrease) Increase in Deferred Tax Asset Related to Market Value of Investments Available for Sale		(652,937	)		2,605,019			2,128,787
Dividends Declared But Not Paid		2,253,304			2,081,344			2,060,614
Stock Options and Stock Appreciation Rights Exercised for Stock		209,256			—			69,767

See accompanying notes to consolidated financial statements.

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Notes to Consolidated Financial Statements

Note 1 — Summary of Significant Accounting Policies

The accounting and reporting policies of Suffolk Bancorp and its subsidiary conform to generally accepted accounting principles and general practices within the banking industry. The following footnotes describe the most significant of these policies.

In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported assets and liabilities as of the date of the consolidated statements of condition. The same is true of revenues and expenses reported for the period. Actual results could differ significantly from those estimates.

(A) Consolidation — The consolidated financial statements include the accounts of Suffolk and its wholly owned subsidiary, Suffolk County National Bank (the “Bank”). In 1998, the Bank formed a Real Estate Investment Trust named Suffolk Green-way, Inc. In 2004, the Bank formed an insurance agency named SCNB Financial Services, Inc. All intercompany transactions have been eliminated in consolidation.

(B) Investment Securities — Suffolk reports debt securities and mortgage-backed securities in one of the following categories: (i) “held to maturity” (management has the intent and ability to hold to maturity), which are to be reported at amortized cost; (ii) “trading” (held for current resale), which are to be reported at fair value, with unrealized gains and losses included in earnings; and (iii) “available for sale” (all other debt securities and mortgage-backed securities), which are to be reported at fair value, with unrealized gains and losses excluded from earnings and reported as a separate component of stockholders’ equity. Accordingly, Suffolk classified all of its holdings of debt securities and mortgage-backed securities as either “held to maturity” or “available for sale.” At the time a security is purchased, a determination is made as to the appropriate classification.

Premiums and discounts on debt and mortgage-backed securities are amortized as expense and accreted as income over the estimated life of the respective security using a method that approximates the level-yield method. Gains and losses on the sales of investment securities are recognized upon realization, using the specific identification method and shown separately in the consolidated statements of income.

In November 2005, the FASB issued FASB Staff Position (“FSP”) SFAS 115-1 and 124-1, “The Meaning of Other-Than Temporary Impairment and Its Application to Certain Investments.” This FSP nullifies certain requirements of EITF-03-1 on this topic and provides additional guidance on when an investment in a debt or equity security should be considered impaired and when that impairment should be considered other-than-temporary and recognized as a loss in earnings. Specifically, the guidance clarifies that an investor should recognize an impairment loss no later than when the impairment is deemed other-than-temporary, even if a decision to sell has not been made. The FSP also required certain disclosures about unrealized losses that have not been recognized as other-than-temporary impairments. The amount of any other-than-temporary impairment that needs to be recognized will continue to be dependent on market conditions, the occurrence of certain events or changes in circumstances relative to an investee and an entity’s intent and ability to hold the impaired investment at the time of the valuation. FSP SFAS 115-1 and 124-1 was effective for reporting periods beginning after December 15, 2005. Adoption of the FSP did not have a material impact on the Company’s financial position or results of operations.

(C) Loans and Loan Interest Income Recognition — Loans are stated at the principal amount outstanding. Interest on loans not made on a discounted basis is credited to income, based upon the principal amount outstanding during the period. Unearned discounts on installment loans are credited to income using methods that result in a level yield. Recognition of interest income is discontinued when reasonable doubt exists as to whether interest due can be collected. Loans generally no longer accrue interest when 90 days past due. When a loan is placed on non-accrual status, all interest previously accrued in the current year, but not collected, is reversed against current-year interest income. Any interest accrued in prior years is charged against the allowance for loan losses. Loans and leases start accruing interest again when they become current as to principal and interest, and when, in the opinion of management, the loans can be collected in full.

(D) Allowance for Loan Losses — The balance of the allowance for loan losses is determined by management’s estimate of the amount of financial risk in the loan portfolio and the likelihood of loss. The analysis also considers the Bank’s loan loss experience and may be adjusted in the future depending on economic conditions. Additions to the allowance are made by charges to expense, and actual losses, net of recoveries, are charged to the allowance. Regulatory examiners may require the Bank to add to the allowance based upon their judgment of information available to them at the time of their examination.

In accordance with SFAS No. 114, titled “Accounting by Creditors for Impairment of a Loan,” as amended by Statement No. 118, titled “Accounting by Creditors for Impairment of Loan-Income Recognition and Disclosures,” an allowance is maintained for impaired loans to reflect the difference, if any, between the principal balance of the loan and the present value of projected cash flows, observable fair value, or collateral value. SFAS No. 114 defines an impaired loan as a loan for which it is probable that the lender will not collect all amounts due under the contractual terms of the loan.

The Bank accounts for its transfers and servicing financial assets in accordance with SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.” SFAS No. 140 revises the standards for accounting for the securitizations and other transfers of financial assets and collateral. Transfers of financial assets for which the Bank has surrendered control of the financial assets are accounted for as sales to the extent that consideration other than beneficial interests in the transferred assets is received in exchange. Retained interests in a sale or securitization of financial assets are measured at the date of transfer by allocating the previous carrying

25

amount between the assets transferred and based on their relative estimated fair values. The fair values of retained servicing rights and any other retained interests are determined based on the present value of expected future cash flows associated with those interests and by reference to market prices for similar assets. There were no transfers of financial assets to related or affiliated parties. At December 31, 2006 and 2005, the Bank’s servicing loan portfolio approximated $102,661,000, and $97,913,000, respectively. The estimated fair value of mortgage servicing rights was $1,262,000 and $1,189,000 as of December 31, 2006 and 2005, respectively.

The Bank accounts for letters of credit in accordance with FASB Interpretation 45 (“FIN 45”), “Guarantor’s Accounting and Disclosure Requirements for Guarantees, including Indirect Guarantees of Indebtedness of Others.” Suffolk has financial and performance letters of credit. Financial letters of credit require the Bank to make payment if the customer’s financial condition deteriorates, as defined in the agreements. Performance letters of credit require the Bank to make payments if the customer fails to perform certain nonfinancial contractual obligations. The maximum potential undiscounted amount of the future payments of these letters of credit as of December 31, 2006 is $16,887,000 and they expire as follows:

2007	$	10,304,000
2008		6,163,000
2010		245,000
2011 and thereafter		175,000
	$	16,887,000

Amounts due under these letters of credit would be reduced by any proceeds that Suffolk would be able to obtain in liquidating the collateral for the loans, which varies depending on the customer. The valuation of the allowance for loan losses includes a provision of $25,000 for loan losses based on the letters of credit outstanding on December 31, 2006.

(E) Premises and Equipment — Premises and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation is calculated by the declining-balance or straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized using the straight-line method over the term of the lease or the estimated life of the asset, whichever is shorter.

The Bank measures impairment of long-lived assets in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” SFAS No. 144 retains the existing requirements to recognize and measure the impairment of long-lived assets to be held and used or to be disposed of by sale. There was no impairment of long-lived assets as of December 31, 2006 and 2005, respectively.

(F) Other Real Estate Owned — Property acquired through foreclosure (other real estate owned or “OREO”), is stated at the lower of cost or fair value less selling costs. Credit losses arising at the time of the acquisition of property are charged against the allowance for loan losses. Any additional write-downs to the carrying value of these assets that may be required, as well as the cost of maintaining and operating these foreclosed properties, are charged to expense. Additional write-downs are recorded in a valuation reserve account that is maintained asset by asset.

(G) Excess of Cost Over Fair Value of Net Assets Acquired and Other Intangible Assets — Through December 31, 2001, the excess of cost over fair value of net assets acquired (goodwill) was amortized on a straight-line basis over a period of ten years. Effective with the adoption of SFAS No. 142, “Goodwill and Other Intangible Assets,” on January 1, 2002, the Bank ceased amortizing goodwill and, instead, tests goodwill for impairment on a periodic basis.

(H) Income Taxes — Suffolk uses an asset and liability approach to accounting for income taxes. The asset and liability approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. Deferred tax assets are recognized if it is more likely than not that a future benefit will be realized. It is management’s position that no valuation allowance is necessary against any of Suffolk’s deferred tax assets.

(I) Summary of Retirement Benefits Accounting — Suffolk’s retirement plan is noncontributory and covers substantially all eligible employees. The plan conforms to the provisions of the Employee Retirement Income Security Act of 1974, as amended and the Pension Protection Act of 2006, which requires certain funding rules for defined benefit plans. Suffolk’s policy is to accrue for all pension costs and to fund the maximum amount allowable for tax purposes. Actuarial gains and losses that arise from changes in assumptions concerning future events are amortized over a period that reflects the long-term nature of pension expense used in estimating pension costs.

On December 31, 2006, Suffolk adopted FASB Statement No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans – an amendment of FASB Statements No. 87, 88, 106 and 132(R).” This statement requires an employer to recognize the overfunded or underfunded status of a defined benefit postretirement plan as an asset or liability in its statement of financial position and to recognize changes in the funded status of the plan in the year in which the changes occur through comprehensive income. At December 31, 2006, Suffolk’s projected benefit obligation exceeded the fair value of plan assets at year end by $637,000. Accordingly, a credit of $4,620,000 was recorded to reduce the prepaid pension cost of $3,983,000 and to establish a liability to reflect the unfunded minimum obligation. Additionally, a deferred tax asset adjustment was recorded in the amount of $1,888,000 to record the tax effect of the loss. The remaining loss of $2,732,000, net of tax, has been recorded in Other Comprehensive Losses in the accompanying Statement of Condition. The adoption of Statement 158 did not affect the Company’s statement of operations for the year ended December 31, 2006, or any prior periods. Application of the Statement will not change the calculation of net income in future periods, but will affect the calculation of other comprehensive income.

26

Suffolk accrues for post-retirement benefits other than pensions by accruing the cost of providing those benefits to an employee during the years that the employee serves.

(J) Cash and Cash Equivalents — For purposes of the consolidated statement of cash flows, cash and due from banks, and federal funds sold are considered to be cash equivalents. Generally, federal funds are sold for one-day periods.

(K) Stock-Based Compensation — At December 31, 2006, the Bank had one stock-based employee compensation plan, which is more fully described in Note 8. Prior to January 1, 2006, Suffolk accounted for that plan under the recognition and measurement principles of APB Opinion No. 25, “Accounting for Stock Issued to Employees,” (“APB No. 25”) and related interpretations. No stock-based employee compensation costs were reflected in net income, as all options granted under the plan had an exercise price equal to the market value of the underlying common stock on the date of grant. On January 1, 2006 Suffolk adopted SFAS No. 123(R), “Share-Based Payment” (“SFAS No. 123( R )”). This statement supersedes APB No. 25. SFAS 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values. This statement was adopted using the modified prospective method of application, which requires the recognition of compensation expense on a prospective basis. Accordingly, prior periods have not been restated. This statement also revised SFAS No. 123 “Accounting for Stock-Based Compensation,” which superseded APB No. 25. SFAS 123 required the disclosure of the effect on net income and earnings-per-share using fair value recognition provisions. The following table illustrates the effect on net income and earnings-per-share if the Bank had applied the recognition provisions of SFAS 123 to stock-based compensation: (in thousands, except per-share amounts)

		2005		2004
Net Income:	As Reported	$	22,102	$	20,875
Stock-Based Compensation Expense			70		51
	Pro Forma		22,032		20,824
Basic EPS:	As Reported		2.09		1.92
	Pro Forma		2.08		1.91
Diluted EPS:	As Reported		2.09		1.91
	Pro Forma		2.08		1.91

During 2006, $137,000 of compensation expense, net of a tax benefit of $95,000, was recorded for stock-based compensation. As of December 31, 2006, there was $20,000 of total unrecognized compensation cost, net of estimated forfeitures, related to non-vested options under the stock-based employee compensation plan. That cost is expected to be recognized over a weighted average period of one month.

(L) Treasury Stock — The balance of treasury stock is computed at par value. The excess cost over par is subtracted from undivided profits.

(M) Earnings-per-share — Basic earnings-per-share is computed by dividing net income by the number of weighted-average shares outstanding during the period. Diluted earnings-per-share reflect the dilution that would occur if stock options were exercised in return for common stock that would then share in Suffolk’s earnings. It is computed by dividing net income by the sum of the weighted-average number of common shares outstanding and the weighted-average number of stock options exercisable during the period. Suffolk has no other securities that could be converted into common stock, nor any contracts that would result in the issuance of common stock.

(N) Comprehensive Income — Comprehensive income includes net income and all other changes in equity during a period except those resulting from investments by owners and distributions to owners. Other comprehensive income includes revenues, expenses, gains, and losses that under generally accepted accounting principles are included in comprehensive income but excluded from net income. Comprehensive income and accumulated other comprehensive income are reported net of related income taxes. Accumulated other comprehensive income for the Bank consists of unrealized holding gains or losses on securities available for sale, and gains or losses on the unfunded projected benefit obligation of the pension plan.

As of December 31, 2006, the fair market value of the Company’s investments classified Available for Sale was $403,246,000. The book value of the Company’s investments classified Available for Sale was $405,514,000. The net difference or net unrealized loss on Available for Sale investments as of December 31, 2006 was $2,268,000. Available for Sale investments are recorded on the Statement of Condition at fair market value. The corresponding entries as of December 31, 2006 include a deferred tax asset of $930,000 and a capital accumulated other comprehensive loss, net of tax amount of $1,338,000.

At December 31, 2006, the unfunded projected benefit obligation of the pension plan recorded on the statement of condition, was $637,000. The corresponding entries at December 31, 2006, include a deferred tax asset of $1,888,000 and a capital accumulated other comprehensive loss, net of tax amount of $2,732,000.

(O) Segment Reporting — SFAS No. 131, “Disclosures About Segments of an Enterprise and Related Information,” requires that public companies report certain information about operating segments. It also requires that public companies report certain information about their products and services, the geographic areas in which they operate, and their major customers. Suffolk is a regional bank, which offers a wide array of products and services to its customers. Pursuant to its banking strategy, emphasis is placed on building relationships with its customers, as opposed to building specific lines of business. As a result, at December 31, 2006 and 2005, Suffolk is not organized around discernible lines of business and prefers to work as an integrated unit to customize solutions for its customers, with business line emphasis and product offerings changing over time as needs and demands change. Thus, all necessary requirements of SFAS No. 131 have been met by Suffolk as of December 31, 2006.

(P) Reclassification of Prior Year Consolidated Financial Statements — Certain reclassifications have been made to the prior year’s consolidated financial statements that conform with the current year’s presentation.

27

Note 2 — Investment Securities

The amortized cost, estimated fair values, and gross unrealized gains and losses of Suffolk’s investment securities available for sale and held to maturity at December 31, 2006 and 2005 were: (in thousands)

	2006									2005
	Amortized Cost		Estimated Fair Value		Gross Unrealized Gains		Gross Unrealized Losses			Amortized Cost		Estimated Fair Value		Gross Unrealized Gains		Gross Unrealized Losses
Available for sale:
U.S. Treasury securities	$	9,559	$	9,423	$	—	$	(136	)	$	9,442	$	9,337	$	—	$	(105	)
U.S. government agency debt		125,276		122,883		176		(2,569	)		126,055		123,421		447		(3,081	)
Collateralized mortgage obligations agency issue		156,528		156,239		637		(926	)		195,207		194,404		471		(1,274	)
Mortgage-backed securities		1,039		1,072		33		—			1,712		1,788		76		—
Obligations of states and political subdivisions		113,112		113,629		931		(414	)		71,483		71,088		289		(684	)
Balance at end of year		405,514		403,246		1,777		(4,045	)		403,899		400,038		1,283		(5,144	)
Held to maturity:
Obligations of states and political subdivisions		9,913		10,463		588		(38	)		11,378		11,989		664		(53	)
Other securities		5,184		5,184		—		—			5,896		5,896		—		—
Balance at end of year		15,097		15,647		588		(38	)		17,274		17,885		664		(53	)
Total investment securities	$	420,611	$	418,893	$	2,365	$	(4,083	)	$	421,173	$	417,923	$	1,947	$	(5,197	)

The amortized cost, maturities, and approximate fair value of Suffolk’s investment securities at December 31, 2006 are as follows: (in thousands)

	Available for Sale												Held to Maturity
	U.S. Treasury Securities				U.S. Govt. Agency Debt				Obligations of States & Political Subdivisions				Obligations of States & Political Subdivisions				Other Securities				Total Amortized Cost		Total Fair Value
(1) Maturity (in years)	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
Within 1	$	—	$	—	$	20,115	$	19,893	$	—	$	—	$	2,919	$	2,922	$	—	$	—	$	23,034	$	22,815
After 1 but within 5		9,559		9,423		105,161		102,990		2,125		2,102		1,405		1,415		—		—		118,250		115,930
After 5 but within 10		—		—		—		—		47,203		47,249		2,953		3,067		—		—		50,156		50,316
After 10		—		—		—		—		63,784		64,278		2,636		3,059		—		—		66,420		67,337
Other Securities		—		—		—		—		—		—		—		—		5,184		5,184		5,184		5,184
Subtotal	$	9,559	$	9,423	$	125,276	$	122,883	$	113,112	$	113,629	$	9,913	$	10,463	$	5,184	$	5,184	$	263,044	$	261,582
Collateralized mortgage obligations																						156,528		156,239
Mortgage-backed securities																						1,039		1,072
Total																					$	420,611	$	418,893

(1) Maturities shown are stated maturities. Securities backed by mortgages are expected to have substantial periodic prepayments resulting in weighted average lives considerably less than what would be surmised from the table above.

As a member of the Federal Reserve system, the Bank owns Federal Reserve Bank stock with a book value of $638,000. The stock has no maturity and there is no public market for the investment.

As a member of the Federal Home Loan Bank of New York, the bank owns Federal Home Loan Bank of New York stock with a book value of $4,446,000. The stock has no maturity and there is no public market for the investment.

At December 31, 2006 and 2005, investment securities carried at $266,492,000 and $161,285,000 respectively, were pledged to secure trust deposits and public funds on deposit. The following table presents detail concerning realized securities gains and losses during the years indicated: (in thousands)

	2006		2005			2004
Gross realized gains	$	—	$	—		$	1,994
Gross realized losses		—		22			—
Net (losses) gains	$	—	$	(22	)	$	1,994

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The table below indicates the length of time individual securities, both held-to-maturity and available-for-sale, have been held in a continuous unrealized loss position at the date indicated: (in thousands)

As of December 31, 2006	Number of Securities	Less than 12 months				12 months or longer				Total
Type of securities		Fair value		Unrealized losses		Fair value		Unrealized losses		Fair value		Unrealized losses
U. S. government agency securities	5	$	19,892	$	222	$	85,781	$	2,346	$	105,673	$	2,569
U.S. Treasury securities	2		—		—		9,423		136		9,423		136
Municipal securities	167		2,922		1		69,706		451		72,627		452
Collateralized mortgage obligations	13		—		—		69,915		926		69,915		926
Total	187	$	22,814	$	223	$	234,825	$	3,859	$	257,639	$	4,083
As of December 31, 2005	Number of Securities	Less than 12 months				12 months or longer				Total
Type of securities		Fair value		Unrealized losses		Fair value		Unrealized losses		Fair value		Unrealized losses
U. S. government agency securities	6	$	502	$	3	$	105,413	$	3,078	$	105,915	$	3,081
U.S. Treasury securities	1		—		—		3,383		105		3,383		105
Municipal securities	207		3,539		12		51,957		725		55,496		737
Collateralized mortgage obligations	21		—		—		121,555		1,274		121,555		1,274
Total	235	$	4,041	$	15	$	282,308	$	5,182	$	286,349	$	5,197

Management has considered factors regarding other-than-temporarily impaired securities and determined that there are not impaired securities as of December 31, 2006.

Note 3 — Loans

At December 31, 2006 and 2005, loans included the following: (in thousands)

	2006			2005
Commercial, financial, and agricultural	$	182,840		$	179,523
Commercial real estate		292,458			308,436
Real estate construction loans		80,687			67,411
Residential mortgages (1st and 2nd liens)		155,107			131,006
Home equity loans		76,361			80,775
Consumer loans		103,142			132,973
Other loans		892			4,956
		891,487			905,080
Unearned discounts		(40	)		(43	)
Allowance for loan losses		(7,551	)		(9,828	)
Balance at end of year	$	883,896		$	895,209

Restructured loans, loans not accruing interest, and loans contractually past due 90 days or more with regard to payment of principal and/or interest amounted to $892,000 and $4,459,000 at December 31, 2006 and 2005, respectively. Interest on loans that have been restructured or are no longer accruing interest would have amounted to $68,000 during 2006, $335,000 during 2005, and $292,000 during 2004, under contractual terms of those loans. Interest income recognized on restructured and non-accrual loans was immaterial for the years 2006, 2005, and 2004.

Suffolk makes loans to its directors and executives, as well as to other related parties in the ordinary course of its business. Loans made to directors and executives, either directly or indirectly, which exceed $60,000 in aggregate for any one director or executive, totaled $11,547,000 and $15,615,000 at December 31, 2006 and 2005, respectively. Unused portions of lines of credit to directors and executives, directly or indirectly, totaled $12,355,000 and $13,078,000. New loans totaling $42,643,000 were granted and payments of $46,711,000 were received during 2006.

Note 4 — Allowance for Loan Losses

An analysis of the changes in the allowance for loan losses follows: (in thousands)

	2006			2005			2004
Balance at beginning of year	$	9,828		$	8,210		$	8,551
Provision for loan losses		966			1,575			1,973
Loans charged-off		(3,757	)		(608	)		(3,189	)
Recoveries on loans		514			651			875
Balance at end of year	$	7,551		$	9,828		$	8,210

At December 31, 2006 and 2005, respectively, the Bank’s recorded investment in impaired loans and the related valuation allowance calculated under SFAS No. 114 and SFAS No. 118 are as follows: (in thousands)

	2006		2005
Recorded investment	$	576	$	3,910
Valuation allowance		240		3,626

This valuation allowance is included in the allowance for loan losses on the statements of condition. The average investment in impaired loans in 2006 was $1,999,000, compared to $4,136,000 in 2005.

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Note 5 — Premises and Equipment

The following table details premises and equipment: (in thousands)

	Estimated Useful Lives	2006			2005
Land	Indefinite	$	3,326		$	3,326
Premises	30 -40 years		18,719			18,633
Furniture, fixtures & equipment	3 - 7 years		23,710			22,286
Leasehold improvements	1 - 15 years		2,683			2,580
			48,438			46,825
Accumulated depreciation and amortization			(25,967	)		(24,033	)
Balance at end of year		$	22,471		$	22,792

Depreciation and amortization charged to operations amounted to $2,200,000, $2,110,000, and $2,140,000 during 2006, 2005, and 2004, respectively.

Note 6 — Deposits

The following table summarizes the contractual maturities of time deposits during the years after 2006: (in thousands)

Year during which Time Deposit Matures	Time Deposits > $100,000		Other Time Deposits
2007	$	78,229	$	159,222
2008		836		16,144
2009		197		4,104
2010		800		7,950
2011		1,780		4,699
Total	$	81,842	$	192,119

Note 7 — Short-Term Borrowings

Presented below is information concerning short-term interest-bearing liabilities — principally Federal Home Loan Bank Borrowings, Securities Sold Under Agreements to Repurchase, and Federal Funds Purchased — with maturities of less than one year, and their related weighted-average interest rates for the years 2006 and 2005: (dollars in thousands)

December 31,	2006			2005			2004
Daily average outstanding	$	137,511		$	63,169		$	3,842
Total interest cost		6,960			2,192			48
Average interest rate paid		5.06	%		3.47	%		1.24	%
Maximum amount outstanding at any month-end	$	192,675		$	127,975		$	25,300
December 31, balance		120,135			127,975			25,300
Weighted-average interest rate on balances outstanding		5.35	%		4.30	%		2.41	%

For purposes of borrowing, Suffolk has no assets pledged as collateral to the Federal Reserve Bank as of December 31, 2006. Assets pledged as collateral to the Federal Home Loan Bank as of December 31, 2006 totaled $143,061,000.

Note 8 — Stockholders’ Equity

Suffolk has a Dividend Reinvestment Plan. Stockholders can reinvest dividends in common stock of Suffolk at a 3 percent discount from market value on newly issued shares. Shareholders may also make additional cash purchases. No shares were issued in 2006, 2005, or 2004.

At December 31, 2006, Suffolk has a Stock Option Plan (“the Plan”) under which 1,200,000 shares of Suffolk’s common stock were originally reserved for issuance to key employees, and of which 1,061,500 remained available at that date. Options are awarded by a committee appointed by the Board of Directors. The Plan provides that the option price shall not be less than the fair value of the common stock on the date the option is granted. All options are exercisable for a period of ten years or less. The Plan provides for but does not require the grant of stock appreciation rights that the holder may exercise instead of the underlying option. When the stock appreciation right is exercised, the underlying option is canceled. The optionee receives shares of common stock with a fair market value equal to the excess of the fair value of the shares subject to the option at the time of exercise (or the portion thereof so exercised) over the aggregate option price of the shares set forth in the option agreement. The exercise of stock appreciation rights is treated as the exercise of the underlying option. Options vest after one year and expire after ten years. Compensation expense related to stock appreciation rights amounted to approximately $93,000, $31,000, and $78,000 for the years ended December 31, 2006, 2005, and 2004, respectively. The following table presents the options granted, exercised, or expired during each of the past three years:

	Shares		Wtd. Avg. Exercise
Balance at December 31, 2003	75,500		$	18.14
Options granted	16,000			34.39
Options exercised	(4,000	)		15.50
Options expired or terminated	—			—
Balance at December 31, 2004	87,500		$	21.23
Options granted	23,000			31.25
Options exercised	—			—
Options expired or terminated	—			—
Balance at December 31, 2005	110,500		$	23.32
Options granted	25,000			34.95
Options exercised	(14,000	)		14.38
Options expired or terminated	(4,000	)		33.11
Balance at December 31, 2006	117,500		$	26.52

The following table presents additional information:

At, or during, year ended December 31,	2006			2005			2004
Average remaining contractual life in years		6.31			6.28			6.91
Exercisable options (vested)		93,500			87,500			71,500
Weighted average fair value of options (Black-Scholes model) at date of grant:	$	9.44		$	8.11		$	10.39
Black-Scholes Assumptions:
Risk-free interest rate		4.36	%		4.19	%		4.20	%
Expected dividend yield		2.36	%		2.24	%		2.33	%
Expected life in years		10			10			10
Expected volatility		22.00	%		20.50	%		26.20	%

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The following table details contractual weighted-averages lives of outstanding options at various prices:

	By range of exercise prices
from		13.13		31.25		34.39
to		15.50		31.83		34.95
Outstanding stock options		42,000		36,500		39,000
Weighted-average remaining life		3.60		7.30		8.30
Weighted-average exercise price	$	14.60	$	31.48	$	34.73
Exercisable stock options		42,000		36,500		15,000
Weighted-average remaining life		3.60		7.30		7.08
Weighted-average exercise price	$	14.60	$	31.48	$	34.39
	Weighted-average
At all prices	Options		price		life (yrs)
Total outstanding		117,500	$	26.52		6.28
Total exerciseable		93,500	$	24.36		5.60

All dividends must conform to applicable statutory requirements. Under 12 USC 56-9, a national bank may not pay a dividend on its common stock if the dividend would exceed net undivided profits then on hand. Further, under 12 USC 60, a national bank must obtain prior approval from the Office of the Comptroller of the Currency (“OCC”) to pay dividends on either common or preferred stock that would exceed the bank’s net profits for the current year combined with retained net profits (net profits minus dividends paid during that period) from the prior two years. At December 31, 2006, approximately $31,752,000 was available for dividends from the Bank to Suffolk Bancorp without prior approval of the OCC.

Note 9 — Income Taxes

The following table presents the provision for income taxes in the consolidated statements of income which is comprised of the following: (in thousands)

		2006		2005			2004
Current:	Federal	$	10,071	$	11,782		$	10,857
	State		1,746		2,191			1,967
			11,817		13,973			12,824
Deferred:	Federal		776		(456	)		675
	State		220		(141	)		(69	)
			996		(597	)		606
Total		$	12,813	$	13,376		$	13,430

The total current tax expense was greater than the amounts computed by applying the federal income tax rate because of the following:

	2006		2005		2004
Federal income tax expense at statutory rates	35	%	35	%	35	%
Tax-exempt interest	(3	)%	(2	)%	(1	)%
State income taxes net of federal benefit	3	%	4	%	4	%
Other	1	%	1	%	1	%
Total	36	%	38	%	39	%

The effects of temporary differences between tax and financial accounting that create significant deferred-tax assets and liabilities at December 31, 2006 and 2005, and the recognition of income and expense for purposes of tax and financial reporting, that resulted in a net increase to Suffolk’s net deferred tax asset for the years ended December 31, 2006, 2005, and 2004 are presented below: (in thousands)

	2006		2005		2004
Deferred tax assets:
Provision for possible loan losses	$	3,086	$	4,017	$	3,355
Post-retirement benefits		1,010		993		961
Deferred compensation		1,837		1,765		1,742
Securities available for sale		930		1,583		—
Unfunded pension obligation		1,888		—		—
Other		352		365		571
Total deferred tax assets before valuation allowance		9,103		8,723		6,629
Valuation allowance		—		—		—
Total deferred tax assets net of valuation allowance		9,103		8,723		6,629
Deferred tax liabilities:
Prepaid pension cost		1,628		1,584		1,522
Securities available for sale		—		—		1,022
Other		677		580		728
Total deferred tax liabilities		2,305		2,164		3,272
Net deferred tax asset	$	6,798	$	6,559	$	3,357

Note 10 — Employee Benefits

(A) Retirement Plan — Suffolk has a noncontributory defined benefit pension plan available to all full-time employees who are at least 21 years old and have completed at least one year of employment. The plan is governed by the rules and regulations in the Prototype Plan of the New York Bankers Association Retirement System and the Retirement System Adoption Agreement executed by the Bank. For purposes of investment, the plan contributions are pooled with those of other participants in the system.

The following tables set forth the status of Suffolk Bancorp’s combined plan as of September 30, 2006 and September 30, 2005, the time at which the annual valuation of the plan is made.

The following table sets forth the plan’s change in benefit obligation:

	2006			2005
Benefit obligation at start of year	$	25,187,518		$	21,269,432
Service cost		1,401,348			1,194,639
Interest cost		1,359,983			1,250,591
Actuarial (gain) loss		(993,049	)		2,480,423
Benefits paid		(1,162,590	)		(1,007,567	)
Benefit obligation at end of year	$	25,793,210		$	25,187,518

31

The following table sets forth the plan’s change in plan assets:

	2006			2005
Fair value of plan assets at start of year	$	22,285,195		$	19,709,574
Actual return on plan assets		2,602,939			2,376,097
Employer contribution		1,430,806			1,207,091
Benefits paid		(1,162,590	)		(1,007,567	)
Fair value of plan assets at end of year	$	25,156,350		$	22,285,195

Suffolk will be required to make an annual minimum contribution of $1,541,906 by June 15, 2007 for the plan year ending September 30, 2006 and no contribution is currently required for the plan year ending September 30, 2007.

The following table presents estimated benefits to be paid during the years indicated: (in thousands)

	Qualified Pension plan		Post- retirement plan
2007	$	1,068	$	43
2008		1,070		49
2009		1,098		52
2010		1,137		55
2011		1,167		59
2012-2016		7,156		346

The following table summarizes the net periodic pension cost:

	2006			2005			2004
Service cost	$	1,401,348		$	1,194,639		$	1,128,438
Interest cost on projected benefit obligations		1,359,983			1,250,591			1,163,160
Expected return on plan assets		(1,779,840	)		(1,571,239	)		(1,408,445	)
Net amortization & deferral		263,230			180,768			184,093
Net periodic pension cost	$	1,244,721		$	1,054,759		$	1,067,246
Weighted-average discount rate		5.50	%		6.00	%		6.75	%
Rate of increase in future compensation		3.00	%		3.00	%		3.00	%
Expected long-term rate of return on assets		8.00	%		8.00	%		8.00	%

The following table summarizes the net periodic pension cost for December 31, 2007, determined by assumptions established on the October 1, 2006, measurement date. This expense amount is subject to change if a significant plan related event should occur before the end of fiscal 2007.

	2007
Service cost	$	1,381,723
Interest cost on projected benefit obligations		1,482,086
Expected return on plan assets		(1,883,320	)
Net amortization & deferral		130,947
Net periodic pension cost	$	1,111,436
Weighted-average discount rate		5.86	%
Rate of increase in future compensation		3.50	%
Expected long-term rate of return on assets		7.50	%

Plan Assets

Suffolk’s pension plan weighted-average asset allocations at September 30, 2006 and 2005, by asset category are as follows:

	at September 30,
Asset category	2006		2005
Equity Securities	59.80	%	58.80	%
Debt Securities	39.90	%	41.20	%
Other	0.03	%	0.00	%
Total	100	%	100	%

Investment Policies

The New York State Bankers Retirement System (the “System”) was established in 1938 to provide for the payment of benefits to employees of participating banks. The System is overseen by a Board of Trustees who meet quarterly and set the investment policy guidelines.

The System utilizes two investment management firms (which will be referred to as Firm I and Firm II), each investing approximately 50 percent of the total portfolio. The System’s investment objective is to exceed the investment benchmarks in each asset category. Each firm operates under a separate written investment policy approved by the Trustees and designed to achieve an allocation approximating 60 percent invested in equity securities and 40 percent invested in debt securities.

Each Firm shall report at least quarterly to the Investment Committee and semiannually to the Board.

Equity Securities

The target allocation percentage for equity securities is 60 percent but may vary from 50-70 percent at the investment manager’s discretion.

Firm I is employed for its expertise as a Value Manager. It is allowed to invest a certain amount of the equity portfolio under its management in international securities and to hedge said international securities so as to protect against currency devaluations.

The equities managed by Firm II are in a separately managed Large Cap Core Equity Fund. The portfolio is permitted to invest in a diversified range of securities in the U.S. equity markets. Although the portfolio holds primarily common stocks, from time to time the portfolio may invest in other types of investments on an opportunistic basis.

32

Debt Securities

For both investment portfolios, the target allocation percentage for debt securities is 40 percent but may vary from 30-50 percent at the investment manager’s discretion.

The Fixed Income Portfolio managed by Firm I operates with guidelines relating to types of debt securities, quality ratings, maturities, and maximum single and sector allocations.

The portfolio may trade foreign currencies in both spot and forward markets to effect securities transactions and to hedge underlying asset positions. The purchase and sale of futures and options on futures on foreign currencies and on foreign and domestic bonds, bond indices, and short-term securities is permitted; however, purchases may not be used to leverage the portfolio. Currency transactions may be used only to hedge 0-100 percent of currency exposure of foreign securities.

The Fixed Income portfolio managed by Firm II is a Core Bond Fixed Income Fund. The portfolio investments are limited to U.S. Dollar denominated, fixed income securities and selective derivatives designed to have similar attributes of such fixed income securities. The term “fixed income security” is defined to include instruments with fixed, floating, variable, adjustable, auction rate, zero, or other coupon features.

Expected Long-Term Rate of Return

The expected long-term rate of return on plan assets reflects long-term earnings expectations on existing plan assets and those contributions expected to be received during the current plan year. In estimating that rate, appropriate consideration was given to historical returns earned by plan assets in the fund and the rates of return expected to be available for reinvestment. Average rates of return over the past one-, three-, five-, and ten-year periods were determined and subsequently adjusted to reflect current capital market assumptions and changes in investment allocations.

(B) Director’s Retirement Income Agreement of the Bank of the Hamptons — On April 11, 1994, Suffolk acquired Hamptons Bancshares, Inc., which had a director’s deferred compensation plan. The liability for this plan was approximately $222,000 and $255,000 on December 31, 2006 and 2005. Interest (approximately $18,000 in 2006 and $20,000 in 2005) is accrued over the term of the plan. In 2006, the Bank paid approximately $51,000 to participants.

(C) Deferred Compensation

1986 Plan — During 1986, the Board approved a deferred compensation plan. Under the plan, certain employees and Directors of Suffolk elected to defer compensation aggregating approximately $177,000 in exchange for stated future payments to be made at specified dates. The rate of return on the initial deferral was guaranteed. For purposes of financial reporting, interest (approximately $216,000 in 2006, $222,000 in 2005, and $239,000 in 2004) at the plan’s contractual rate is being accrued on the deferral amounts over the expected plan term.

During 2006, Suffolk made payments of approximately $160,000 to participants of the plan. Suffolk has purchased life insurance policies on the plan’s participants based upon reasonable actuarial benefit and other financial assumptions where the present value of the projected cash flows from the insurance proceeds approximates the present value of the projected cost of the employee benefit. Suffolk is the named beneficiary on the policies. Net insurance income related to the policies aggregated approximately $20,000, $72,000, and $57,000, in 2006, 2005, and 2004, respectively.

1999 Plan—During 1999, the Board approved a non-qualified deferred compensation plan. Under this plan, certain employees and Directors of Suffolk may elect to defer some or all of their compensation in exchange for a future payment of the compensation deferred, with accrued interest, at retirement. During 2006, participants deferred compensation totaling $126,000. No payments have been made to any of the participants.

(D) Post-Retirement Benefits Other Than Pension —The following table sets forth the post-retirement benefit liability included in other liabilities in the accompanying consolidated statements of condition as of December 31, 2006 and 2005:

	2006			2005
Accumulated post-retirement benefit obligation (the “APBO”):
Retirees	$	(735,500	)	$	(718,235	)
Fully eligible active plan participants		(282,856	)		(306,429	)
Other active participants		(246,446	)		(277,088	)
Total APBO	$	(1,264,802	)	$	(1,301,752	)
Unrecognized net gain		(1,068,130	)		(989,836	)
Unrecognized past service cost		(11,602	)		(12,410	)
Unrecognized transition obligation		4,650			5,558
Post-retirement benefit liability	$	(2,339,884	)	$	(2,298,440	)

Net periodic post-retirement benefit cost (the “net periodic cost”) for the years ended December 31, 2006, 2005, and 2004 includes the following components:

	2006			2005			2004
Service cost of benefits earned	$	39,392		$	37,411		$	39,480
Interest cost on liability		65,918			64,102			81,445
Unrecognized (gain) loss		(56,743	)		(61,133	)		(38,047	)
Net periodic cost	$	48,567		$	40,380		$	82,878

Benefit assumptions are based on sponsor contributions of $0.27 per participant per month per $1,000 of life insurance. The retiree is responsible for the premiums, less sponsor contributions. The Bank no longer contributes towards a retiree health plan.

(E) 401(k) Retirement Plan

The Bank has a 401(k) Retirement Plan and Trust (the “401(k) Plan”). Employees who have attained the age of 21 and have completed one year of service have the option to participate. Employees may elect to contribute up to a dollar limit which is set by law. The limit was $15,000 for 2006. The Bank will

33

match one-half of the employee’s contribution up to a maximum of 6% of the employee’s annual gross compensation subject to the aforementioned limit. Employees are fully vested in their own contributions and the Bank’s matching contributions are fully vested once the participant has six years of service. Bank contributions under the 401(k) Plan amounted to $350,000, $325,000, and $336,000 in 2006, 2005, and 2004, respectively. The Bank funds all amounts when due. At December 31, 2006, contributions to the 401(k) Plan were invested in various bond, equity, money market, or diversified funds as directed by each employee. The 401(k) Plan does not allow for investment in the Company’s common stock.

Note 11 — Commitments and Contingent Liabilities

In the normal course of business, there are various outstanding commitments and contingent liabilities, such as standby letters of credit and commitments to extend credit, which are not reflected in the accompanying consolidated financial statements. No material losses are anticipated as a result of these transactions. Suffolk is contingently liable under standby letters of credit in the amount of $16,887,000 and $6,647,000 at December 31, 2006 and 2005, respectively. Suffolk has commitments to make or to extend credit in the form of revolving open-end lines secured by one- to four-family residential properties, commercial real estate, construction and land development loans, and lease financing arrangements in the amount of $161,600,000 and $159,151,000, and commercial loans of $43,285,000 and $34,580,000 as of December 31, 2006 and 2005, respectively.

In the opinion of management, based upon legal counsel, liabilities arising from legal proceedings against Suffolk would not have a significant effect on the financial position of Suffolk.

During 2006, Suffolk was required to maintain balances with the Federal Reserve Bank of New York for reserve and clearing requirements. These balances averaged $3,499,000 in 2006.

Total rental expense for the years ended December 31, 2006, 2005, and 2004 amounted to $978,000, $963,000, and $712,000, respectively.

At December 31, 2006, Suffolk was obligated under a number of non-cancelable operating leases for land and buildings used for bank purposes. Minimum annual rentals, exclusive of taxes and other charges under non-cancelable operating leases, are summarized as follows: (in thousands)

	Minimum Rentals
2007	$	996
2008		976
2009		993
2010		929
2011 and thereafter		6,324

34

Note 12 — Regulatory Capital

The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital requirements that involve quantitative measures of the Bank’s assets, liabilities, and certain off-balance-sheet items calculated under regulatory accounting practices. The Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weighting, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the following table) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital (as defined) to average assets (as defined). Management believes, as of December 31, 2006, that the Bank meets all capital adequacy requirements to which it is subject.

As of December 31, 2006, the most recent notification from the Comptroller of the Currency categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain minimum total risk-based, Tier 1 risk-based, and Tier 1 leverage ratios as set forth in the table. Management believes that since that notification no circumstances have changed the institution’s category.

The Bank’s actual capital amounts and ratios are also presented in the following table: (dollars in thousands)

	Actual capital ratios				Minimum for capital adequacy				Minimum to be “Well Capitalized” under prompt corrective action provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio
As of December 31, 2006
Total Capital (to risk-weighted assets)	$	119,366	11.29	%	$	84,565	8.00	%	$	105,706	10.00	%
Tier 1 Capital (to risk-weighted assets)		111,815	10.58	%		42,282	4.00	%		63,423	6.00	%
Tier 1 Capital (to average assets)		111,815	7.94	%		56,335	4.00	%		70,418	5.00	%
As of December 31, 2005
Total Capital (to risk-weighted assets)	$	113,665	10.96	%	$	82,938	8.00	%	$	103,672	10.00	%
Tier 1 Capital (to risk-weighted assets)		103,837	10.02	%		41,469	4.00	%		62,203	6.00	%
Tier 1 Capital (to average assets)		103,837	7.50	%		55,384	4.00	%		69,230	5.00	%

Note 13 — Credit Concentrations

Suffolk’s principal investments are loans and a portfolio of short- and medium-term debt of the United States Treasury, states and other political subdivisions, U.S. government agencies, corporations, and mortgage-backed securities and collateralized mortgage obligations.

Loans secured by real estate comprise 67.8 percent of the portfolio and 43.4 percent of assets, 32.8 percent of which are for commercial real estate. Commercial real estate loans present greater risk than residential mortgages. Suffolk has attempted to minimize the risks of these loans by considering several factors, including the creditworthiness of the borrower, location, condition, value, and the business prospects for the security property. Commercial, financial, and agricultural loans, unsecured or secured by collateral other than real estate, comprise 20.5 percent of the loan portfolio and 13.1 percent of assets. These loans present significantly greater risk than other types of loans. Average credits are greater in size than consumer loans, and unsecured loans may be more difficult to collect. Suffolk obtains, whenever possible, both the personal guarantees of the principal(s) and cross-guarantees among the principals’ business enterprises. Consumer loans, net of unearned discounts, comprised 11.6 percent of Suffolk’s loan portfolio and 7.4 percent of assets. A majority are indirect dealer-generated loans secured by automobiles. Most of these loans are made to residents of Suffolk’s primary lending area. Each loan is small in amount. Borrowers represent a cross-section of the population and are employed in a variety of industries. The risk presented by any one loan is correspondingly small, and therefore, the risk that this portion of the portfolio presents to Suffolk depends on the financial stability of the population as a whole, not any one entity or industry.

Municipal obligations constitute 29.6 percent of the investment portfolio and 8.9 percent of assets. These obligations present slightly greater risk than U.S. Treasury securities, or those secured by the U.S. government, but significantly less risk than loans because they are backed by the full faith and taxing power of the issuer, each of which is located in the state of New York. U.S. Treasury securities represented 2.3 percent of the investment portfolio and 0.7 percent of assets. U.S. government agency debt securities represented 29.4 percent of the investment portfolio and 8.8 percent of assets. These offer little or no financial risk. Collateralized mortgage obligations represented 37.3 percent of the investment portfolio and 11.2 percent of assets. Mortgage-backed securities represented 0.3 percent of the investment portfolio and 0.1 percent of assets.

35

Note 14 — Fair Value of Financial Instruments

The following table presents the carrying amounts and fair values of Suffolk’s financial instruments. SFAS No. 107, “Disclosures About Fair Value of Financial Instruments,” defines the fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation: (in thousands)

	2006				2005
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Cash & cash equivalents	$	43,576	$	43,576	$	48,530	$	48,530
Investment securities available for sale		403,246		403,246		400,038		400,038
Investment securities held to maturity		15,097		15,647		17,274		17,884
Loans, net		891,447		885,045		905,037		895,370
Accrued interest receivable		7,609		7,609		6,747		6,747
Deposits		1,139,075		1,137,047		1,158,707		1,155,959
Accrued interest payable		3,373		3,373		1,722		1,722

Limitations

The following estimates are made at a specific point in time and may be based on judgments regarding losses expected in the future, risk, and other factors that are subjective in nature. The methods and assumptions used to produce the fair value estimates follow.

Short-Term Instruments

Short-term financial instruments are valued at the carrying amounts included in the statements of condition, which are reasonable estimates of fair value due to the relatively short term of the instruments. This approach applies to cash and cash equivalents; federal funds purchased; accrued interest receivable; non-interest-bearing demand deposits; N.O.W., money market, and saving accounts; accrued interest payable; and other borrowings.

Loans

Fair values are estimated for portfolios of loans with similar characteristics. Loans are segregated by type.

The fair value of performing loans was calculated by discounting scheduled cash flows through the estimated maturity using estimated market discount rates that reflect the credit and inter est rate risk of the loan. Estimated maturity is based on the Bank’s history of repayments for each type of loan and an estimate of the effect of the current economy.

Fair value for significant non-performing loans is based on recent external appraisals of collateral, if any. If appraisals are not available, estimated cash flows are discounted using a rate commensurate with the associated risk. Assumptions regarding credit risk, cash flows, and discount rates are made using avail able market information and specific borrower information.

The carrying amount and fair value of loans were as follows at December 31, 2006 and 2005: (in thousands)

	2006				2005
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Commercial, financial & agricultural	$	182,840	$	182,460	$	179,523	$	178,956
Commercial real estate		292,458		289,374		308,436		300,677
Real estate construction loans		80,687		80,657		67,411		68,387
Residential mortgages (1st & 2nd liens)		155,107		154,421		131,006		130,560
Home equity loans		76,361		75,625		80,775		80,524
Consumer loans		103,102		101,616		132,930		131,310
Other loans		892		892		4,956		4,956
Totals	$	891,447	$	885,045	$	905,037	$	895,370

Investment Securities

The fair value of the investment portfolio, including mortgage-backed securities, was based on quoted market prices or market prices of similar instruments.

Deposit Liabilities

The fair value of certificates of deposit less than $100,000 was calculated by discounting cash flows with applicable origination rates. At December 31, 2006, the fair value of certificates of deposit less than $100,000 totaling $190,272,000 had a carrying value of $192,119,000. At December 31, 2006, the fair value of certificates of deposit more than $100,000 totaling $81,662,000 had a carrying value of $81,842,000.

Commitments to Extend Credit, Standby Letters of Credit, and Written Financial Guarantees

The fair value of commitments to extend credit was estimated by either discounting cash flows or using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the current credit-worthiness of the counterparties.

Credit in the form of revolving open-end lines secured by one- to four-family residential properties, commercial real estate, construction and land development loans, and lease financing arrangements were $161,600,000 and $159,151,000 as of December 31, 2006 and 2005, respectively.

The estimated fair value of written financial guarantees and letters of credit is based on fees currently charged for similar agreements. The contractual amounts of these commitments were $60,171,000 and $41,227,000 at December 31, 2006 and 2005, respectively. The fees charged for the commitments were not material in amount.

36

Note 15 — Selected Quarterly Financial Data (Unaudited)

The comparative results for the four quarters of 2006 and 2005 are as follows: (in thousands of dollars except for share and per-share data)

	2006								2005
	1st Qtr.		2nd Qtr.		3rd Qtr.		4th Qtr.		1st Qtr.		2nd Qtr.		3rd Qtr.		4th Qtr.
Interest income	$	20,539	$	21,817	$	21,858	$	21,995	$	17,808	$	18,653	$	19,348	$	19,864
Interest expense		4,384		5,148		5,438		5,529		2,314		2,751		2,866		3,381
Net interest income		16,155		16,669		16,420		16,466		15,494		15,902		16,482		16,483
Provision for loan losses		300		300		345		21		300		375		450		450
Net interest income after provision for loan losses		15,855		16,369		16,075		16,445		15,194		15,527		16,032		16,033
Other income		2,386		2,719		2,750		2,817		2,338		2,489		2,528		2,811
Other expense		9,860		10,039		10,002		10,074		9,293		9,464		9,178		9,539
Provision for income taxes		3,157		3,410		2,655		3,591		3,107		3,227		3,537		3,505
Net income	$	5,224	$	5,639	$	6,168	$	5,597	$	5,132	$	5,325	$	5,845	$	5,800
Basic per-share data:
Net income	$	0.50	$	0.55	$	0.60	$	0.55	$	0.48	$	0.50	$	0.55	$	0.56
Cash dividends	$	0.22	$	0.22	$	0.22	$	0.22	$	0.19	$	0.20	$	0.20	$	0.20
Average shares		10,355,554		10,297,824		10,247,565		10,238,718		10,764,150		10,616,833		10,494,505		10,412,798

37

Note 16 — Suffolk Bancorp (Parent Company Only) Condensed Financial Statements (in thousands)

Condensed Statements of Condition as of December 31,	2006			2005			2004
Assets
Due From Banks	$	2,298		$	2,098		$	2,074
Investment in Subsidiaries: SCNB		108,559			102,373			106,436
Other Assets		296			242			430
Total Assets	$	111,153		$	104,713		$	108,940
Liabilities and Stockholders’ Equity
Dividends Payable	$	2,253		$	2,081		$	2,061
Other Liabilities		334			631			667
Stockholders’ Equity		108,566			102,001			106,212
Total Liabilities and Stockholders’ Equity	$	111,153		$	104,713		$	108,940
Condensed Statements of Income for the Years Ended December 31,	2006			2005			2004
Income
Net Security Gains	$	—		$	—		$	—
Other Income		—			—			—
Dividends From Subsidiary Bank		14,911			22,546			12,215
		14,911			22,546			12,215
Expense
Other Expense		262			172			203
Income Before Equity in Undistributed Net Income of Subsidiaries		14,649			22,374			12,012
Equity in Undistributed Earnings of Subsidiaries		7,979			(272	)		8,863
Net Income	$	22,628		$	22,102		$	20,875
Condensed Statements of Cash Flows for the Years Ended December 31,	2006			2005			2004
Cash Flows From Operating Activities
Net Income	$	22,628		$	22,102		$	20,875
Less: Equity in Undistributed Earnings of Subsidiaries		(7,979	)		272			(8,863	)
Other, Net		93			151			(231	)
Net Cash Provided by Operating Activities		14,742			22,525			11,781
Cash Flows From Investing Activities
Maturities of Investment Securities; Available for Sale		—			—			—
Net Cash Provided by Investing Activities		—			—			—
Cash Flows From Financing Activities
Stock Appreciation Rights Exercised		—			—			70
Repurchase of Common Stock		(5,674	)		(14,200	)		(3,574	)
Dividends Paid		(8,868	)		(8,301	)		(8,286	)
Net Cash Used in Financing Activities		(14,542	)		(22,501	)		(11,790	)
Net Increase in Cash and Cash Equivalents		200			24			(9	)
Cash and Cash Equivalents, Beginning of Year		2,098			2,074			2,083
Cash and Cash Equivalents, End of Year	$	2,298		$	2,098		$	2,074

Note: No income tax provision has been recorded on the books of Suffolk Bancorp since it files a return consolidated with its subsidiaries.

38

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and

Shareholders of Suffolk Bancorp

We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control over Financial Reporting, that Suffolk Bancorp and its subsidiary maintained effective internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Suffolk Bancorp’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that Suffolk Bancorp maintained effective internal control over financial reporting as of December 31, 2006, is fairly stated, in all material respects, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Also in our opinion, Suffolk Bancorp maintained, in all material respects, effective internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Suffolk Bancorp as of December 31, 2006 and 2005, and the related consolidated statements of income, changes in stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2006 and our report dated March 9, 2007 expressed an unqualified opinion on those financial statements.

Philadelphia, Pennsylvania	GRANT THORNTON, LLP
March 9, 2007

39

REPORT OF INDEPENDENT REGISTERED PUBLIC

ACCOUNTING FIRM

Board of Directors and

Shareholders of Suffolk Bancorp

We have audited the accompanying consolidated balance sheets of Suffolk Bancorp and its subsidiary as of December 31, 2006 and 2005, and the related consolidated statements of income, changes in stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2006. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Suffolk Bancorp as of December 31, 2006 and 2005, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2006 in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 1 to the financial statements, the Company has adopted Financial Accounting Standards Board Statement (FASB) No. 123(R), Share-Based Payments and FASB No.158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans - an amendment of FASB Statements No. 87, 88, 106, and 132(R) in 2006.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Suffolk Bancorp’s internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated March 9, 2007 expressed an unqualified opinion on management’s assessment of the effectiveness of internal control over financial reporting and an unqualified opinion on the effectiveness of internal control over financial reporting.

Philadelphia, Pennsylvania

March 9, 2007

REPORT OF MANAGEMENT

Board of Directors and

Shareholders of Suffolk Bancorp

The management of Suffolk Bancorp is responsible for the preparation and integrity of the consolidated financial statements and all other information in this annual report, whether audited or unaudited. The financial statements have been prepared in accordance with generally accepted accounting principles and, where necessary, are based on management’s best estimates and judgment. The financial information contained elsewhere in this annual report is consistent with that in the consolidated financial statements.

Suffolk Bancorp’s independent registered public accounting firm has been engaged to perform an audit of the consolidated financial statements in accordance with auditing standards of the Public Company Accounting Oversight Board (United States), and the firm’s report expresses its opinion as to the fair presentation of the consolidated financial statements and conformity with generally accepted accounting principles.

Suffolk Bancorp maintains systems of internal controls that provide reasonable assurance that assets are safeguarded and keeps reliable financial records for preparing financial statements. Internal audits are conducted to continually evaluate the adequacy and effectiveness of such internal controls, policies, and procedures.

The audit committee of the Board of Directors, which is composed entirely of directors who are not employees of Suffolk Bancorp, meets periodically with the internal auditors, and management to discuss audit and internal accounting controls, regulatory audits, and financial reporting matters.

Thomas S. Kohlmann

President & Chief Executive Officer

J. Gordon Huszagh

Executive Vice President & Chief Financial Officer

Riverhead, New York

March 9, 2007

40

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

x Annual report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 2006

-OR-

¨ Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from              to             .

Commission File Number: 01-13580

SUFFOLK BANCORP

(Name of Issuer in Its Charter)

New York	11-2708279
(State or Other Jurisdiction of Incorporation of Organization)	(I.R.S. Employer Identification No.)
4 West Second Street, P.O. Box 9000, Riverhead, New York	11901
(Address of Principal Executive Offices)	(Zip Code)

Issuer’s Telephone Number, Including Area Code: (631) 727-5667

Securities registered under Section 12(b) of the Exchange Act: None

Securities registered under Section 12(g) of the Exchange Act: Common Stock, par value $2.50 per share

(Title of Class)

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    YES  ¨    NO  x

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act YES  ¨    NO  x

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    YES  x    NO  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein and will not be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  ¨    Accelerated filer  x    Non-accelerated filer  ¨

Indicate by check mark whether the Registrant is a shell company.    YES  ¨    NO  x

The aggregate market value of the common equity held by non-affiliates of the Registrant as of the last business day of the Registrant’s most recently completed second fiscal quarter was $364.9 million.

As of January 31, 2007, there were 10,239,392 shares outstanding of the Registrant’s common stock.

41

PART I

DOCUMENT INCORPORATED BY REFERENCE

Portions of the Registrant’s Proxy Statement for its Annual Meeting of Shareholders to be held April 10, 2007, filed on March 9, 2007. (Part III)

ITEM 1. Business

Suffolk Bancorp (“Suffolk”)

Suffolk was incorporated on January 2, 1985 as a bank holding company. On that date, Suffolk acquired, and currently owns, all of the outstanding capital stock of Suffolk County National Bank. On July 14, 1988, Suffolk acquired all the outstanding capital stock of Island Computer Corporation of New York, Inc. The business of Suffolk consists primarily of the ownership, supervision, and control of its subsidiaries. On April 11, 1994, Suffolk acquired all the outstanding capital stock of Hamptons Bancshares, Inc. and merged it into a subsidiary. During 1996, the operations of Island Computer Corporation of New York, Inc. were assumed by Suffolk County National Bank.

Suffolk’s chief competition includes local banks with main or branch offices in the service area of Suffolk County National Bank, including North Fork Bank and Bridgehampton National Bank. Additionally, New York City money center banks and regional banks provide competition. These banks include primarily the Citibank, Bank of America, J.P. Morgan Chase, Commerce Bank and Hudson City Savings.

Suffolk and its subsidiaries had 343 full-time and 59 part-time employees on December 31, 2006.

Suffolk County National Bank (“Bank”)

The Suffolk County National Bank of Riverhead was organized under the national banking laws of the United States of America on January 6, 1890. The Bank is a member of the Federal Reserve System, and its deposits are insured by the Federal Deposit Insurance Corporation to the extent provided by law.

Directed by members of the communities it serves, the Bank’s main service area includes the towns of Babylon, Brookhaven, East Hampton, Islip, Riverhead, Smithtown, Southampton, and Southold. The main office of the Bank is situated at 6 West Second Street, Riverhead, New York. Its branch offices are located at Bohemia, Center Moriches, Cutchogue, Deer Park, East Hampton, Hampton Bays, Hauppauge, Manorville, Mattituck, Medford, Miller Place, Montauk, Port Jefferson, Riverhead, Sag Harbor, Sayville, Shoreham, Smithtown, Southampton, Wading River, Water Mill, West Babylon, and Westhampton Beach, New York.

The Bank is a full-service bank serving the needs of the local residents of Suffolk County. Most of the Bank’s business is devoted to serving those residing in the immediate area of the Bank’s main and branch offices. Among the services offered by the Bank are checking accounts, savings accounts, time and savings certificates, money market accounts, negotiable-order-of-withdrawal accounts, holiday club accounts, and individual retirement accounts; secured and unsecured loans, including commercial loans to individuals, partnerships, and corporations, agricultural loans to farmers, installment loans to finance small businesses, mobile home loans, and automobile loans; home equity and real estate mortgage loans; safe deposit boxes; trust and estate services; the sale of mutual funds and annuities; and the maintenance of a master pension plan for self-employed individuals’ participation. The business of the Bank is only mildly seasonal.

AVAILABLE INFORMATION

Suffolk files Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Proxy Statements on Form 14(a), and any amendments to those reports, with the United States Securities and Exchange Commission (“SEC”). The public may read and copy any of these materials at the SEC’s Public Reference Room at 450 Fifth Street, NW, Washington, D.C. 20549. Information on the operation of the Public Reference Room can be obtained by calling the SEC at 1-800-SEC-0330 (1-800-732-0330). The SEC also maintains an Internet site (http://www.sec.gov) that contains reports, proxy, and information statements, and other information regarding issuers, including Suffolk, that file electronically with the SEC. Suffolk also makes these reports available free of charge through its Internet website (http://www.suffolkbancorp.com) as soon as practicably possible after Suffolk files these reports electronically with the SEC.

SUPERVISION AND REGULATION

References in this section to applicable statutes and regulations are brief summaries only, and do not purport to be complete. The reader should consult such statutes and regulations themselves for a full understanding of the details of their operation.

As a consequence of the extensive regulation of commercial banking activities in the United States, the business of Suffolk and its subsidiaries are particularly susceptible to federal and state legislation that may have the effect of increasing or decreasing the cost of doing business, modifying permissible activities, or enhancing the competitive position of other financial institutions.

Suffolk is a bank holding company registered under the Bank Holding Company Act (“BHC” Act) and is subject to supervision and regulation by the Federal Reserve Board. Federal laws subject bank holding companies to particular restrictions on the types of activities in which they may engage, and to a range of supervisory requirements and activities, including regulatory enforcement actions for violation of laws and policies.

Activities “Closely Related” to Banking

The BHC Act prohibits a bank holding company, with certain limited exceptions, from acquiring direct or indirect ownership or control of any voting shares of any company that is not a bank or from engaging in any activities other than those of banking, managing or controlling banks and certain other subsidiaries, or furnishing services to or performing services for its subsidiaries. One principal exception to these prohibitions allows the acquisition of interests in companies whose activities are found

42

by the Federal Reserve Board, by order or regulation, to be closely related to banking, or managing or controlling banks. If a bank holding company has become a “financial holding company” (an “FHC”), it may engage in activities that are jointly determined by the Federal Reserve Board and the Treasury Department to be “financial in nature or incidental to such financial activity.” FHCs may also engage in activities that are determined by the Federal Reserve to be “complementary to financial activities.” See “Gramm-Leach-Bliley Act” for a brief summary of the statutory provisions relating to FHCs.

Safe and Sound Banking Practices

Bank holding companies are not permitted to engage in unsafe and unsound banking practices. The Federal Reserve Board may order a bank holding company to terminate an activity or control of a nonbank subsidiary if such activity or control constitutes a significant risk to the financial safety, soundness, or stability of a subsidiary bank and is inconsistent with sound banking principles. Regulation Y also requires a holding company to give the Federal Reserve Board prior notice of any redemption or repurchase of its own equity securities, if the consideration to be paid, together with the consideration paid for any repurchases or redemptions in the preceding year, is equal to 10 percent or more of the company’s consolidated net worth.

The Federal Reserve Board has broad authority to prohibit activities of bank holding companies and their non-banking subsidiaries which represent unsafe and unsound banking practices or which constitute violations of laws or regulations. Notably, the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (“FIRREA”) provides that the Federal Reserve Board can assess civil money penalties for such practices or violations, which can be as high as $1 million per day. FIRREA contains expansive provisions regarding the scope of individuals and entities against which such penalties may be assessed.

Annual Reporting and Examinations

Suffolk is required to file an annual report with the Federal Reserve Board, and such additional information as the Federal Reserve Board may require pursuant to the BHC Act. The Federal Reserve Board may examine a bank holding company or any of its subsidiaries, and charge the company for the cost of such an examination. Suffolk is also subject to reporting and disclosure requirements under state and federal securities laws.

Imposition of Liability for Undercapitalized Subsidiaries

The Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”) required each federal banking agency to revise its risk-based capital standards to ensure that those standards take adequate account of interest rate risk, concentration of credit risk, and the risks of nontraditional activities, as well as reflect the actual performance and expected risk of loss on multifamily mortgages. In accordance with the law, each federal banking agency has specified, by regulation, the levels at which an insured institution would be considered “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized,” and “critically undercapitalized.” Under these regulations, as of December 31, 2006, the Bank would be deemed to be “well capitalized.”

FDICIA requires bank regulators to take “prompt corrective action” to resolve problems associated with insured depository institutions. In the event an institution becomes “undercapitalized,” it must submit a capital restoration plan. If an institution becomes “significantly undercapitalized” or “critically undercapitalized,” additional and significant limitations are placed on the institution. The capital restoration plan of an undercapitalized institution will not be accepted by the regulators unless each company “having control of” the undercapitalized institution “guarantees” the subsidiary’s compliance with the capital restoration plan until it becomes “adequately capitalized.” Suffolk has control of the Bank for purpose of this statute.

Additionally, Federal Reserve Board policy discourages the payment of dividends by a bank holding company from borrowed funds as well as payments that would adversely affect capital adequacy. Failure to meet the capital guidelines may result in supervisory or enforcement actions by the Federal Reserve Board.

Acquisition by Bank Holding Companies

The BHC Act requires every bank holding company to obtain the prior approval of the Federal Reserve Board before it may acquire all or substantially all of the assets of any bank, or ownership or control of any voting shares of any bank, if after such acquisition it would own or control, directly or indirectly, more than 5 percent of the voting shares of such bank. In approving bank acquisitions by bank holding companies, the Federal Reserve Board is required to consider the financial and managerial resources and future prospects of the bank holding company and banks concerned, the convenience and needs of the communities to be served, and the effect on competition. The Attorney General of the United States may, within 30 days after approval of an acquisition by the Federal Reserve Board, bring an action challenging such acquisition under the federal antitrust laws, in which case the effectiveness of such approval is stayed pending a final ruling by the courts. Under certain circumstances, the 30-day period may be shortened to 15 days.

Interstate Acquisitions

Under the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994, beginning September 29, 1995, bank holding companies may acquire banks in any state subject to limited restrictions including bank age and deposit concentration limits, notwithstanding contrary state law. All banks owned in common by a bank holding company may act as agents for one another. An agent bank may receive deposits, renew time deposits, accept payments, and close and service loans for its principal bank and not be considered to be a branch of the principal banks.

Banks also may merge with banks in another state and operate either office as a branch, preexisting contrary state law notwithstanding. This law became effective automatically in all states on June 1, 1997, unless a state, by legislation enacted before June 1, 1997, opted out of coverage by the interstate branching provision. Upon consummation of an interstate merger, the resulting bank may acquire or establish branches on the same basis that any participant in the merger could have if the merger had not taken place.

43

Banks may also merge with branches of banks in other states without merging with the banks themselves, or may establish de novo branches in other states if the laws of the other states expressly permit such mergers or such interstate de novo branching.

Banking Regulation

The Bank is a national bank, which is subject to regulation and supervision primarily by the Office of the Comptroller of the Currency (the “OCC”) and secondarily by the Federal Reserve Board and the FDIC. The Bank is subject to the requirements and restrictions under federal law, including requirements to maintain reserves against deposits, restrictions on the types and amounts of loans that may be granted and the interest that may be charged thereon, and limitations on the types of investments that may be made and the types of services that may be offered. Various consumer laws and regulations also affect the operations of the Bank.

Restrictions on Transactions with Affiliates

Section 23A of the Federal Reserve Act imposes quantitative and qualitative limits on transactions between a bank and any affiliate, and requires certain levels of collateral for such loans. It also limits the amount of advances to third parties which are collateralized by the securities or obligations of Suffolk or its subsidiaries.

Section 23B requires that certain transactions between the Bank and its affiliates must be on terms substantially the same, or at least as favorable, as those prevailing at the time for comparable transactions with or involving other nonaffiliated companies. In the absence of such comparable transactions, any transaction between the Bank and its affiliates must be on terms and under circumstances, including credit standards, that in good faith would be offered to or would apply to nonaffiliated companies.

Examinations

The OCC regularly examines the Bank and records of the Bank. The FDIC may also periodically examine and evaluate insured banks. In addition, the Federal Reserve Board regularly examines the Bank and records of Suffolk.

Standards for Safety and Soundness

As part of the FDICIA’s efforts to promote the safety and soundness of depository institutions and their holding companies, appropriate federal banking regulators are required to have in place regulations specifying operational and management standards (addressing internal controls, loan documentation, credit underwriting, and interest rate risk), asset quality, and earnings. In addition, the Federal Reserve Board, the OCC, and FDIC have extensive authority to police unsafe or unsound practices and violations of applicable laws and regulations by depository institutions and their holding companies. For example, the FDIC may terminate the deposit insurance of any institution that it determines has engaged in an unsafe or unsound practice. The agencies can also assess civil money penalties of up to $1 million per day, issue cease-and-desist or removal orders, seek injunctions, and publicly disclose such actions.

Gramm-Leach-Bliley Act

The Gramm-Leach-Bliley Act, effective on March 11, 2000, permits bank holding companies to become FHCs and, by doing so, affiliate with securities firms and insurance companies and engage in other activities that are financial in nature or complementary thereto. A bank holding company may become an FHC, if each of its subsidiary banks is well capitalized under the FDICIA prompt corrective action provisions, is well managed, and has at least a satisfactory rating under the Community Reinvestment Act, by filing a declaration that the bank holding company wishes to become an FHC and meets all applicable requirements.

No prior regulatory approval is required for an FHC to acquire a company, other than a bank or savings association, engaged in activities permitted under the Gramm-Leach-Bliley Act. Activities specified in the Gramm-Leach-Bliley Act as being “financial in nature” include securities underwriting and dealing, and insurance underwriting and agency activities. Activities that the Federal Reserve Board has determined to be closely related to banking are also deemed to be financial in nature.

A national bank also may engage, subject to limitations on investment, in activities that are financial in nature, other than insurance underwriting, merchant banking, real estate development, and real estate investment, through a financial subsidiary of the bank, if the bank is well capitalized, well managed, and has at least a satisfactory Community Reinvestment Act rating. Subsidiary banks of an FHC or national bank with financial subsidiaries must continue to be well capitalized and well managed in order to continue to engage in such activities without regulatory actions or restrictions, which could include divestiture of the financial subsidiary or subsidiaries. In addition, an FHC or a bank may not acquire a company that is engaged in such activities unless each of the subsidiary banks of the FHC or the bank has at least a satisfactory Community Reinvestment Act rating.

In July of 2001, provisions of the Gramm-Leach-Bliley Act became effective that impose additional requirements on financial institutions with respect to customer privacy. These provisions generally prohibit disclosure of customer information to nonaffiliated third parties unless the customer has been given the opportunity to object, and has not objected, to such disclosure. Financial institutions are also required to disclose their privacy policies to customers annually and may be required to comply with provisions of applicable state law if such provisions are more protective of customer privacy than those contained in the Gramm-Leach-Bliley Act.

Governmental Monetary Policies and

Economic Conditions

The principal sources of funds essential to the business of banks and bank holding companies are deposits, stockholders’ equity, and borrowed funds. The availability of these various sources of funds and other potential sources, such as preferred stock or commercial paper, and the extent to which they are utilized, depends on many factors, the most important of which are the Federal Reserve Board’s monetary policies and the relative costs of different types of funds. An important function of the Federal

44

Reserve Board is to regulate the national supply of bank credit in order to combat recession and curb inflationary pressure. Among the instruments of monetary policy used by the Federal Reserve Board to implement these objectives are open market operations in United States government securities, changes in the discount rate on bank borrowings, and changes in reserve requirements against bank deposits. The monetary policies of the Federal Reserve Board have had a significant effect on the operating results of commercial banks in the past and are expected to continue to do so in the future. In view of the recent changes in regulations affecting commercial banks and other actions and proposed actions by the federal government and its monetary and fiscal authorities, including proposed changes in the structure of banking in the United States, no prediction can be made as to future changes in interest rates, availability of credit, deposit balances, or the overall performance of banks generally or of Suffolk and its subsidiaries in particular.

STATISTICAL DISCLOSURE

ITEM 2. Properties

Registrant

Suffolk as such has no physical properties. Office facilities of Suffolk are located at 4 West Second Street, Riverhead, New York.

Bank

The Bank’s main office campus, with three buildings, is located at 6 West Second Street, Riverhead, New York, title to which is held by the Town of Riverhead, New York Industrial Development Agency for reasons of tax abatement, but to which the Bank has all other rights of ownership. The Bank also owns a total of 12 properties with 12 buildings in fee, and holds 16 buildings under lease agreements. Management believes that the physical facilities are suitable and adequate and at present are being fully utilized. Suffolk, however, evaluates future needs continuously and anticipates other changes in its facilities during the next several years.

ITEM 3. Legal Proceedings

There are no material legal proceedings, individually or in the aggregate, to which Suffolk or its subsidiaries are a party or of which any of the property is subject.

ITEM 4. Submission of Matters to a Vote of Security Holders

None.

PART II

ITEM 5. Market for Registrant’s Common Equity and Related Stockholder Matters

Pages 6 and 22 of this Annual Report to Shareholders for the fiscal year ended December 31, 2006.

At January 31, 2007, there were approximately 1,585 equity holders of record and approximately 1,700 beneficial shareholders of the Company’s common stock.

ITEM 6. Selected Quarterly Financial Data

Page 37 of this Annual Report to Shareholders for the fiscal year ended December 31, 2006.

ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Pages 7 - 20 of this Annual Report to Shareholders for the fiscal year ended December 31, 2006.

ITEM 7a. Quantitative and Qualitative Disclosure about Market Risk

Page 15 of this Annual Report to Shareholders for the fiscal year ended December 31, 2006.

ITEM 8. Financial Statements and Supplementary Data

Pages 21 - 38 of this Annual Report to Shareholders for the fiscal year ended December 31, 2006.

ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

ITEM 9a. Controls and Procedures

Suffolk’s Chief Executive Officer and Chief Financial Officer (collectively, the “Certifying Officers”) are responsible for establishing and maintaining disclosure controls and procedures for Suffolk. Based upon their evaluation of these controls and procedures as of a date within 90 days of the filing of this report, the Certifying Officers have concluded that Suffolk’s disclosure controls and procedures are effective to ensure that information required to be disclosed by Suffolk in this report is accumulated and communicated to Suffolk’s management, including its principal executive officers as appropriate, to allow timely decisions regarding required disclosure.

The Certifying Officers also have indicated that there were no significant changes in Suffolk’s internal controls or other factors that could significantly affect these controls subsequent to the date of their evaluation, and there were no corrective actions with regard to significant deficiencies and material weaknesses. Management’s Report on Internal Control over Financial Reporting is incorporated herein and can be found on Page 20. Management’s assessment of the effectiveness of Suffolk’s internal control over financial reporting as of December 31, 2006, has been audited by Grant Thornton LLP whose report can be found on Page 39.

45

PART III

ITEM 10. Directors and Executive Officers of the Registrant

Pages 2 - 8 of Registrant’s Proxy Statement for its Annual Meeting of Shareholders to be held on April 10, 2007 is incorporated herein by reference.

EXECUTIVE OFFICERS
Name	Age	Position	Business Experience
Thomas S. Kohlmann	60	Chairman, President, and Chief Executive Officer	Apr-05	-	Present	Chairman, President, CEO, and Director, Suffolk Bancorp
			Oct-99	-	Apr-05	President, CEO, and Director, Suffolk Bancorp
			Oct-99	-	Present	President, CEO, and Director, SCNB
			Jan-98	-	Oct-99	EVP, Suffolk Bancorp
			Jan-96	-	Oct-99	EVP and Chief Lending Officer
			Feb-92	-	Dec-95	SVP, SCNB
			1980	-	Feb-92	Marine Midland Bank
			Employed by SCNB since February 1992.
J. Gordon Huszagh	53	Executive Vice President and Chief Financial Officer	Jan-99	-	Present	EVP and CFO, Suffolk Bancorp
			Jan-99	-	Present	EVP and CFO, SCNB
			Jan-97	-	Jan-99	SVP and CFO, SCNB
			Dec-92	-	Dec-96	SVP & Comptroller, SCNB
			Dec-88	-	Dec-92	VP & Comptroller, SCNB
			Dec-86	-	Dec-88	VP, SCNB
			Jan-83	-	Dec-86	Auditor, SCNB
			1975	-	1982	Eastern Federal Savings and Loan
			Employed by SCNB since January 1983.
Robert C. Dick	57	Executive Vice President and Chief Lending Officer	Apr-00	-	Present	EVP, Suffolk Bancorp
			Apr-00	-	Present	EVP and Chief Lending Officer, SCNB
			Oct-99	-	Apr-00	SVP and Chief Lending Officer, SCNB
			Dec-88	-	Oct-99	SVP, Commercial Loans, SCNB
			Dec-82	-	Apr-88	VP, Commercial Loans, SCNB
			1965	-	1980	Security National Bank/Chemical Bank
			Employed by SCNB since January 1980.
Frank D. Filipo	55	Executive Vice President, Retail Banking	Mar-03	-	Present	EVP, Suffolk Bancorp
			Mar-03	-	Present	EVP, Retail Banking, SCNB
			Sep-01	-	Mar-03	SVP, Retail Banking, SCNB
			Sep-96	-	Sep-01	Regional Administrator, North Fork Bank
			Apr-94	-	Sep-96	SVP, Commercial Loans, SCNB
			Jul-84	-	Apr-94	EVP, Senior Lending Officer, Bank of the Hamptons, N.A.
			1982	-	Jul-84	VP Commerical Loans, Continental Bank
			Employed by SCNB from April 1994 to September 1996 and since September 2001.
Augustus C. Weaver	64	Executive Vice President and Chief Information Officer	Jan-98	-	Present	EVP, Suffolk Bancorp
			Jan-96	-	Present	EVP and Chief Information Officer, SCNB
			Feb-87	-	Dec-95	President, Island Computer Corporation of New York, Inc.
			Feb-86	-	Feb-87	Director of Data Processing and Corporate Planning, Southland Frozen Food Corporation
			Feb-62	-	Feb-86	VP & Director of Operations, Long Island Savings Bank
			Employed by SCNB since February 1996.

46

ITEM 11. Executive Compensation

Pages 8-18 of Registrant’s Proxy Statement for its Annual Meeting of Shareholders to be held on April 10, 2007 is incorporated herein by reference.

ITEM 12. Security Ownership of Certain Beneficial Owners and Management

Pages 2, 12, 13, and 14 of Registrant’s Proxy Statement for its Annual Meeting of Shareholders to be held on April 10, 2007 is incorporated herein by reference.

ITEM 13. Certain Relationships and Related Transactions

Page 4 of Registrant’s Proxy Statement for its Annual Meeting of Shareholders to be held on April 10, 2007 is incorporated herein by reference.

ITEM 14. Principal Accountant Fees and Services

The following table presents the fees billed for each of the last two fiscal years by Suffolk’s principal accountant by category:

	2006		2005
Audit fees	$	298,806	$	283,046
Audit-related fees		23,414		22,453
Tax fees		—		26,629
All other fees		—		—
	$	322,220	$	332,128

The Audit Committee pre-approves all auditing services and permitted non-audit services (including the fees and terms thereof) to be performed for Suffolk by its independent auditor, subject to the de minimus exceptions for non-audit services described in Section 10A (i) (1) (B) of the Exchange Act which are approved by the Committee prior to the completion of the audit. The Audit Committee may form and delegate authority to subcommittees consisting of one or more members when appropriate, including the authority to grant pre-approvals of audit and permitted non-audit services, provided that decisions of such subcommittee to grant pre-approvals shall be presented to the full Audit Committee at its next scheduled meeting. Fees for consultation concerning the computation and filing of income taxes amounting to $40,650 for 2006 were paid to the firm of Marcum & Kliegman, LLP.

PART IV

ITEM 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

The following consolidated financial statements of the Registrant and Subsidiaries, and the accountant’s report thereon, are included on pages 21 through 38 inclusive.

Financial Statements (Consolidated)

Statements of Condition — December 31, 2006 and 2005.

Statements of Income — For the years ended December 31, 2006, 2005, and 2004.

Statements of Changes in Stockholders’ Equity — For the years ended December 31, 2006, 2005, and 2004.

Statements of Cash Flows — For the years ended December 31, 2006, 2005, and 2004.

Notes to Consolidated Financial Statements

EXHIBITS

The following exhibits, which supplement this report, have been filed with the Securities and Exchange Commission. Suffolk Bancorp will furnish a copy of any or all of the following exhibits to any persons sending a request in writing to the Corporate Secretary, Suffolk Bancorp, 4 West Second Street, P.O. Box 9000, Riverhead, New York 11901.

A. Certificate of Incorporation of Suffolk Bancorp (filed by incorporation by reference to Suffolk Bancorp’s Form 10-K for the fiscal year ended December 31, 1999, filed March 10, 2000)

B. Bylaws of Suffolk Bancorp (filed by incorporation by reference to Suffolk Bancorp’s Form 10-K for the fiscal year ended December 31, 1999, filed March 10, 2000)

C. Suffolk Bancorp 1999 Stock Option Plan (filed by incorporation by reference to Suffolk Bancorp’s Form 10-K for the fiscal year ended December 31, 1999, filed March 10, 2000)

D. Suffolk Bancorp Form of Change-of-Control Employment Contract (filed by incorporation by reference to Suffolk Bancorp’s Form 10-K for the fiscal year ended December 31, 1999, filed March 10, 2000)

Reports on Form 8-K

The following reports were filed on Form 8-K during the three-month period ended December 31, 2006:

October 16, 2006, Item 2.02 Results of Operations and Financial Condition. Attached as an exhibit is the Company’s press release titled “Suffolk Bancorp Announces Earnings For The Third Quarter Of 2006” dated October 16, 2006.

November 28, 2006, Item 8.01 Other Events and Required FD Disclosure. Attached as an exhibit is the Company’s press release titled “Suffolk Bancorp Announces Regular Quarterly Dividend” dated November 28, 2006.

47

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

SUFFOLK BANCORP

March 9, 2007

(Registrant)

By:	/s/ THOMAS S. KOHLMANN	By:	/s/ JAMES E. DANOWSKI
	Thomas S. Kohlmann		James E. Danowski
	Chairman of the Board,		Director
	President, Chief Executive Officer, & Director
By:	/s/ J. GORDON HUSZAGH	By:	/s/ JOSEPH A. DEERKOSKI
	J. Gordon Huszagh		Joseph A. Deerkoski
	Executive Vice President & Chief Financial Officer		Director
		By:	/s/ JOSEPH A. GAVIOLA
			Joseph A. Gaviola
			Director
		By:	/s/ EDGAR F. GOODALE
			Edgar F. Goodale
			Director
		By:	/s/ DAVID A. KANDELL
			David A. Kandell
			Director
		By:	/s/ TERENCE X. MEYER
			Terence X. Meyer
			Director
		By:	/s/ SUSAN V. B. O’SHEA
			Susan V. B. O’Shea
			Director

48

Exhibit 31.1

CERTIFICATION OF PERIODIC REPORT

I, Thomas S. Kohlmann, certify that:

1. I have reviewed this annual report on Form 10-K of Suffolk Bancorp;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 9, 2007

/s/ THOMAS S. KOHLMANN

Thomas S. Kohlmann

President & Chief Executive Officer

Exhibit 31.2

CERTIFICATION OF PERIODIC REPORT

I, J. Gordon Huszagh, certify that:

1. I have reviewed this annual report on Form 10-K of Suffolk Bancorp;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 9, 2007

/s/ J. GORDON HUSZAGH

J. Gordon Huszagh

Executive Vice President & Chief Financial Officer

49

Exhibit 32.1

CERTIFICATION OF PERIODIC REPORT

I, Thomas S. Kohlmann, President & Chief Executive Officer of Suffolk Bancorp (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that: (1) the Annual Report on Form 10-K of the Company for the year ended December 31, 2006 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and (2) the information contained in the Report fairly represents, in all material respects, the financial condition and results of operations of the Company.

Dated: March 9, 2007

/s/ Thomas S. Kohlmann

Thomas S. Kohlmann

President & Chief Executive Officer

Exhibit 32.2

CERTIFICATION OF PERIODIC REPORT

I, J. Gordon Huszagh, Executive Vice President & Chief Financial Officer of Suffolk Bancorp (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that: (1) the Annual Report on Form 10-K of the Company for the year ended December 31, 2006 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and (2) the information contained in the Report fairly represents, in all material respects, the financial condition and results of operations of the Company.

Dated: March 9, 2007

/s/ J. Gordon Huszagh

J. Gordon Huszagh

Executive Vice President & Chief Financial Officer

DIRECTORS

James E. Danowski

Partner; Coughlin, Foundotos, Cullen & Danowski

(accounting firm)

Joseph A. Deerkoski

Consultant

(general insurance)

Joseph A. Gaviola

Principal; Gaviola’s Montauk Market

Chris-Nic Properties

(retail, commercial and residential real estate)

Edgar F. Goodale

President; Riverhead Building Supply Corp.

(building supply distributor)

David A. Kandell

Managing Partner; Kandell, Farnworth, & Pubins, C.P.A.’s

(accounting firm)

Thomas S. Kohlmann

Chairman, President & Chief Executive Officer

Terence X. Meyer

Managing Partner; Meyer, Meyer & Keneally, Esqs. L.L.P.

(attorneys)

Susan V. B. O’Shea

Managing Partner; O’Shea Properties

(commercial real estate)

OFFICERS

Thomas S. Kohlmann

Chairman, President & Chief Executive Officer

J. Gordon Huszagh

Executive Vice President & Chief Financial Officer

Robert C. Dick

Executive Vice President

Frank D. Filipo

Executive Vice President

Augustus C. Weaver

Executive Vice President

Douglas Ian Shaw

Senior Vice President & Corporate Secretary

50

DIRECTORS

Thomas S. Kohlmann

Chairman of the Board

James E. Danowski

Joseph A. Deerkoski

Joseph A. Gaviola

Edgar F. Goodale

David A. Kandell

Terence X. Meyer

Susan V. B. O’Shea

EXECUTIVE OFFICERS

Thomas S. Kohlmann

Chairman, President &

Chief Executive Officer

J. Gordon Huszagh

Executive Vice President &

Chief Financial Officer

Robert C. Dick

Executive Vice President &

Chief Lending Officer

Frank D. Filipo

Executive Vice President

Retail Banking

Augustus C. Weaver

Executive Vice President &

Chief Information Officer

LOANS

Bruce W. Bradley

Senior Vice President

Peter M. Almasy

Senior Vice President

David T. DeVito

Senior Vice President

Joan Brigante

Vice President

Robert T. Ellerkamp

Vice President

Robert P. Grady

Vice President

Wendy Harris

Vice President

Benjamin Mancuso

Vice President

Gerard H. McGuirk

Vice President

William Mitarotondo

Vice President

Deborah Simonetti

Vice President

Thomas J. Sullivan

Vice President

Frederick J. Weinfurt

Vice President

RETAIL BANKING

Stanley V. Gelish

Senior Vice President

Anita J. Nigrel

Senior Vice President

Susan M. Martinelli

Vice President

Bohemia Office

Steve E. Horner

Vice President

Center Moriches Office

Julia Pratt

Assistant Vice President

Cutchogue Office

Kim Sweeney

Assistant Vice President

Deer Park Office

Steven DeLuca

Vice President

East Hampton Pantigo Office

Paul D. Hawkins, Jr.

Vice President

East Hampton Village Office

Jill James

Vice President

Hampton Bays Office

David C. Barczak

Vice President

Hauppauge Office

Mark Harrigan

Assistant Vice President

Manorville Office

Tara Sperduto

Assistant Vice President

Mattituck Office

Janet V. Stewart

Vice President

Medford Office

Paul E. Vaas

Vice President

Miller Place Office

Jerilynne DiBartolomeo

Assistant Vice President

Montauk Harbor Office

Montauk Village Office

John J. McDonald

Vice President

Port Jefferson Harbor Office

Port Jefferson Village Office

Jacqueline Brown

Vice President

Riverhead, Ostrander

Avenue Office

Angela R. Reese

Assistant Vice President

Riverhead, Second Street Office

Vincent Cangiano

Vice President

51

Sag Harbor Office

Michael E. Newins

Assistant Vice President

Sayville Office

Pamela S. Werner

Assistant Vice President

Shoreham Office

Wendy A. Stapon

Assistant Vice President

Smithtown Office

Susan L. Hughes

Assistant Vice President

Southampton Office

Patricia Bolomey

Vice President

Wading River Office

John A. Maki

Assistant Vice President

Water Mill Office

Rebecca Collins

Assistant Vice President

West Babylon Office

Joanne Goodman

Assistant Vice President

Westhampton Beach Office

Robin McKenna

Assistant Vice President

TRUST & ASSET MANAGEMENT GROUP

Dan A. Cicale

Senior Vice President & Trust Officer

Trust & Estate Services

Linda Schwartz

Vice President & Trust Officer

Warren Palzer

Vice President

Lori E. Thompson

Vice President

SCNB Financial Services, Inc.

William C. Araneo

Vice President

AUDIT

Maria R. Michaelson

Senior Vice President

Tricia Thomas-Hector

Vice President

COLLECTIONS

Christopher R. Martinelli

Assistant Vice President

COMPTROLLER

Stacey L. Moran

Vice President & Comptroller

CORPORATE SERVICES

Douglas Ian Shaw

Senior Vice President & Corporate Secretary

FACILITIES

Charles E. Anderson

Manager

HUMAN RESOURCES

Nancy Jacob

Vice President

INFORMATION SECURITY

Joanne Appel

Assistant Vice President & Information Security Officer

INFORMATION TECHNOLOGY

Mark J. Drozd

Senior Vice President

Fred A. Bohonan

Vice President

MARKETING

Brenda B. Sujecki

Vice President

OPERATIONS

Dennis F. Orski

Senior Vice President

Deanna L. Miller

Vice President

RISK MANAGEMENT & COMPLIANCE

Jeanne P. Kelley

Senior Vice President

Linda Follett

Vice President

SECURITY

Alexander B. Doroski

Senior Vice President

52

Directory of Offices and Departments
		Area Code (631)
ON THE WEB AT:	WWW.SCNB.COM	Telephone	FAX
Executive Offices	4 West Second Street, P.O. Box 9000, Riverhead, N.Y. 11901	208-2400	727-2638
Audit	4 West Second Street, P.O. Box 9000, Riverhead, N.Y. 11901	208-2285	727-8236
Bohemia Office	3880 Veterans Memorial Highway, Bohemia, N.Y. 11716	585-4477	585-4809
Business and Professional Banking Center	260 Middle County Road, Smithtown, N.Y. 11787	979-3400	979-3430
Center Moriches Office	502 Main Street, Center Moriches, N.Y. 11934	878-8800	878-4431
Collections	206 Griffing Avenue, Riverhead, N.Y. 11901	208-2370	727-5732
Commercial Loans	4 West Second Street, P.O. Box 9000, Riverhead, N.Y. 11901	208-2201	727-5798
	3880 Veterans Memorial Highway, Bohemia, N.Y. 11716	580-0181	580-0183
	137 West Broadway, Port Jefferson, N.Y. 11777	642-1000	642-0200
	295 North Sea Road, Southampton, N.Y. 11968	287-3104	287-3296
Compliance	4 West Second Street, P.O. Box 9000, Riverhead, N.Y. 11901	208-2292	727-2638
Comptroller	4 West Second Street, P.O. Box 9000, Riverhead, N.Y. 11901	208-2270	369-2230
Consumer Loans	4 West Second Street, P.O. Box 9000, Riverhead, N.Y. 11901	208-2222	727-5521
Corporate Services (Investor Relations)	4 West Second Street, P.O. Box 9000, Riverhead, N.Y. 11901	727-5667	727-3214
Cutchogue Office	31525 Main Road, P.O. Box 702, Cutchogue, N.Y. 11935	734-5050	734-7759
Deer Park Office	21 East Industry Court, Suite 4, Deer Park, N.Y. 11729	274-4888	274-4810
Data Processing	206 Griffing Avenue, Riverhead, N.Y. 11901	208-2495	369-5834
East Hampton Pantigo Office	351 Pantigo Road, East Hampton, N.Y. 11937	324-2000	324-6367
East Hampton Village Office	99 Newtown Lane, East Hampton, N.Y. 11937	324-3800	324-3863
Facilities	4 West Second Street, P.O. Box 9000, Riverhead, N.Y. 11901	208-2333	208-0767
Hampton Bays Office	168 West Montauk Highway, Ham pton Bays, N.Y. 11946	728-2700	728-8311
Hauppauge Office	110 Marcus Boulevard, Hauppauge, N.Y. 11788	436-5400	436-4454
Human Resources	4 West Second Street, P.O. Box 9000, Riverhead, N.Y. 11901	208-2310	727-3170
Investments and Insurance at SCNB	6 West Second Street, P.O. Box 9000, Riverhead, NY 11901	208-2380	727-3210
Manorville Office	460 County Road 111, Suite 18, Manorville, N.Y. 11949	281-8200	281-5695
Marketing	4 West Second Street, P.O. Box 9000, Riverhead, N.Y. 11901	208-2323	727-9223
Mattituck Office	10900 Main Road, P.O. Box 1420, Mattituck, N.Y. 11952	298-9400	298-9188
Medford Office	2801 Route 112, Suite B, Medford, N.Y. 11763	758-1500	758-1509
Miller Place Office	159-21A Route 25A, Miller Place, N.Y. 11764	474-8400	474-5357
Montauk Harbor Office	541 West Lake Drive, P.O. Box 2368, Montauk, N.Y. 11954	668-4333	668-3643
Montauk Village Office	746 Montauk Highway, P.O. Box 743, Montauk, N.Y. 11954	668-5300	668-1214
Operations	206 Griffing Avenue, Riverhead, N.Y. 11901	208-2450	369-5834
Port Jefferson Harbor Office	135 West Broadway, Port Jefferson, N.Y. 11777	474-7200	331-7806
Port Jefferson Village Office	228 East Main Street, Port Jefferson, N.Y. 11777	473-7700	473-9406
Residential Mortgage Loans	4 West Second Street, P.O. Box 9000, Riverhead, N.Y. 11901	208-2244	369-2468
Retail Banking	4 West Second Street, P.O. Box 9000, Riverhead, N.Y. 11901	208-2300	727-3873
Riverhead, Ostrander Avenue Office	1201 Ostrander Avenue, P.O. Box 9000, Riverhead, N.Y. 11901	727-6800	727-5095
Riverhead, Second Street Office	6 West Second Street, Riverhead, N.Y. 11901	208-2350	727-3210
Sag Harbor Office	17 Main Street, P.O. Box 1268, Sag Harbor, N.Y. 11963	725-3000	725-4627
Sayville Office	161 North Main Street, Sayville, N.Y. 11782	218-1600	218-9425
SCNB Financial Services, Inc.	31525 Main Road, P.O. Box 702, Cutchogue, N.Y. 11935	208-2380	727-3210
Shoreham Office	9926 Route 25A, P.O. Box 622, Shoreham, N.Y. 11786	744-4400	744-6743
Smithtown Office	260 Middle Country Road, Suite 112, Smithtown, N.Y. 11787	979-3400	979-3430
Southampton Office	295 North Sea Road, Southampton, N.Y. 11968	283-3800	287-3293
Trust and Asset Management	3880 Veterans Memorial Highway, Bohemia, N.Y. 11716	285-6600	285-6610
Wading River Office	2065 Wading River-Manor Road, Wading River, N.Y. 11792	929-6300	929-6799
Water Mill Office	828 Montauk Highway, P.O. Box 216, Water Mill, N.Y. 11976	726-4500	726-7573
West Babylon Office	955 Little East Neck Road, West Babylon, N.Y. 11704	669-7300	669-5211
Westhampton Beach Office	144 Sunset Avenue, Westhampton Beach, N.Y. 11978	288-4000	288-9252